Standing Committee D

[John Bercowin the Chair]

Clause 574

Financial assistance by company for acquisition of shares

Amendment proposed [this day]: No. 471, in clause574,page280,leave out lines 6 to 15.—[Mr. Djanogly.]

Question again proposed, That the amendment be made.

John Bercow: I remind the Committee that with this we are discussing amendment No. 472, in clause574,page280,line11,leave out ‘twelve’ and insert ‘six’.

Margaret Hodge: I shall deal with amendment No. 472, because I believe that amendment No. 471 was dealt with before the break.
We have established that we believe it necessary to retain the criminal sanction for public companies, but hon. Members might be wondering why the penalty on summary conviction appears higher for an offence committed in England and Wales. We do not consider the offence more heinous if it is committed in England and Wales, but we wish to recognise here and elsewhere in the Bill the changes that were introduced by the Criminal Justice Act 2003. That Act increased the sentencing powers of magistrates courts in England and Wales so that the maximum sentence that they can impose has increased from six months to 12 months. We see no reason to limit the sentencing powers of such courts in the case of a breach of the financial assistance provisions, as there is no qualitative difference between the offences in question and any other criminal offence.
The apparent discrepancy between the sentencing powers in England and Wales and those in Scotland and Northern Ireland is simply because criminal law sentencing is a devolved matter. The clauses therefore reflect the different approaches adopted in Scotland and Northern Ireland. There would, however, be nothing to prevent the courts in Scotland and Northern Ireland from imposing a higher penalty than six months, but that would necessitate the offence being tried by jury.
Finally, I should add for the sake of completeness that section 154(4) of the 2003 Act has not yet been commenced. Accordingly, clause 784 of the Bill makes transitory provision for Companies Acts offences committed before the commencement of that section. The maximum on summary conviction for an either-way offence will be six months. I hope that, in the light of that effective explanation of the reasons underlying the provision, hon. Members will not press the amendments.

Jonathan Djanogly: This Minister has been saved by the bell. In her remarks this morning the Under-Secretary of State for Constitutional Affairs commented that as financial assistance is a criminal offence, people will not breach the law. In practice, that is not the case. The reality is that people are breaching the provision regularly across the corporate world. In the vast majority of cases they do not know that they are doing so, and normally it involves small amounts of money. However, breaches happen all the time, so I thought that changing criminal liability to civil liability would be appropriate. We will look at the Minister’s comments in more detail and might return to the matter on Report. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Jonathan Djanogly: I beg to move amendment No. 324, in clause574,page280,line44,at end insert—
‘(6) It is not unlawful, by reason only of any rule of law relating to maintenance of capital, for a private company to give financial assistance directly or indirectly for the purpose of an acquisition of shares in its capital or in the capital of its holding company or to give any such financial assistance of the kind referred to in subsection (2) of section 151 where the acquisition in question is an acquisition of shares in the company or its holding company, provided that either—
(a) the company has net assets which are not thereby reduced and which are not less than the aggregate of its paid up share capital, share premium account and capital redemption reserve (if any), or
(b) to the extent that the net assets of the company are thereby reduced the assistance is either provided out of distributable profits or is authorised as a reduction of capital in accordance with sections 135 to 139.
(7) In this section “net assets” has the meaning ascribed by section 154(2).’.
The amendment makes it clear that, notwithstanding any law to the contrary, a private company can provide assistance for the purchase of its own shares or those of its holding company, as long as its net assets are not thereby reduced or, where they are reduced, the assistance is paid out of distributable profits or, where the assistance gives rise to a reduction of capital, it is first approved.

Vera Baird: The amendment relates to a matter raised with us by the Law Society. We are grateful to it for sending us a paper in connection with that point and for its help generally in scrutinising the Bill.
The general principle of capital loans is a part of company law and dates back a long time. Capital has to be maintained while profits can be distributed to shareholders as a return on their investments. The aim is to protect creditors and ensure fairness between shareholders, and under the rules on the distribution of profits, procedures are available for reducing capital.
Under the principle of capital maintenance, a company cannot buy its own shares. However, there is now a procedure, subject to safeguards, and under a statutory provision on the prohibition of such financial assistance, others may provide it. A company might have a good reason for providing financial assistance for the purposes of someone else buying shares that do not go against the general principle. The Bill will allow that for private companies.
Until now, financial assistance could be provided only in limited circumstances using the whitewash procedure, which enables private companies to provide assistance as long as there is confirmation that the company’s net assets will not be reduced as a result or, to the extent that the assistance reduces the company’s net assets, it is provided at a distributable profit.
The amendment raises the question of whether the whitewash procedure served a further purpose: the provision of a statutory exception to the general principles of capital maintenance. If so, and in the absence of an equivalent to the whitewash procedure in the Bill, removing the prohibition on private companies giving financial assistance for a purchase of its own shares would tighten up, rather than deregulate—the intention—the law on private companies.
I shall not go into the legal reasoning—we had plenty of that this morning. Our view is that the whitewash procedure did not enable or make it lawful for companies to do anything that under the Companies Act 1985 can be done only within certain safeguards. That is an exception on the prohibition on giving financial assistance, not a means by which to make lawful that which, apart from the prohibition, would not be so. I hope that that is sufficient to satisfy the hon. Gentleman.

Jonathan Djanogly: The Minister’s explanation is helpful and makes absolute sense. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 574 disagreed to.

Clause 575

Circumstances in which financial assistance is not prohibited

Jonathan Djanogly: I beg to move amendment No. 325, in clause575,page281,line23,at end insert—
‘(3A) In subsection (3), after paragraph (g) insert—
“(h) the payment of a commission which is permitted by the Companies Acts,
(i) indemnities given in connection with any issue of shares (whether in respect of defaults by the company itself or in respect of defaults by third parties and including indemnities in respect of losses arising in connection with activities carried out as a broker, underwriter, placing agent, adviser or sponsor to an issue),
(j) representations or warranties given by a company in connection with any issue of shares in its capital,
(k) the payment of any fees or other costs, charges or expenses by a company in connection with an issue of shares in its capital.”.’.
Briefly, the purpose of the amendment is to make it clear that certain arrangements cannot amount to unlawful financial assistance. I draw attention to the categories suggested.

Vera Baird: This again is a Law Society issue. In order to address its concerns, which relate to the impact that the financial assistance provisions have on business transactions, it would be necessary to start from scratch, perhaps by adopting a different approach to the requirements of article 23 of the second directive from which section 151 of the 1985 Act derives. Article 23 makes no reference to the items described in the amendment, and we consider that it would not be helpful to add further to a list which arguably already gold-plates the directive. Moreover, the difficulty with extending the list in that way is that it raises a question about the status of arrangements that do not fall within the exact terms of the exceptions.
There was an extensive discussion in the other place, and the various concerns that the Law Society and others have about the way in which the current exemptions are framed may point to a reworking of the provision so that it is to have the intended effect. Such a provision could refer to concepts along the current lines or be framed on an entirely different basis. That would not matter as long as we keep our obligations under the directive. Such a reworking would be much more suitably addressed by the use of the power that we are seeking as part of the restatement exercise than by piecemeal amendments. Therefore, I invite the hon. Gentleman to withdraw his amendment. This provision, like the others in this part, is subject entirely to the restatement procedure, so there is a summer—as it were—yet to come.

Jonathan Djanogly: I thank the Minister for her clarification; her points make sense. On that basis, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 575 disagreed to.

Clause 576 disagreed to.

Clause 577

Power of company to purchase own shares

Jonathan Djanogly: I beg to move amendment No. 431, in clause577,page283,leave out lines 25 and 26.

John Bercow: With this it will be convenient to discuss amendment No. 432, in clause577,page283,line26,at end insert—
‘(3) Where a limited company purchases its own shares, the shares may be paid for in cash or non-cash consideration.’.

Jonathan Djanogly: We turn to the power of a company to purchase its own shares. Amendment No. 431 probes why shares must be paid for on purchase. Does the clause as it stands allow for delayed payment provisions, which could help the company’s cash flow? Amendment No. 432 suggests that the consideration should be in cash or non-cash.

Vera Baird: We are not aware of any evidence that there are companies that are in a position to purchase their own shares but find it difficult to pay for them in cash. We believe that the requirement for cash payment makes sense, and unless there is some real problem, we do not see any reason to change the provision.

Jonathan Djanogly: The difficulty could be cash flow—the amount that the company has to pay at a certain time.

Vera Baird: I do not know that we have found that that is a problem. I said that we are not aware of any evidence of that situation occurring readily. The point is to pay cash at the time of the purchase. There is a framework of rules around the purchase of own shares to ensure that it does not undermine the company’s capital, which has to be maintained to protect the interests of creditors or shareholders. It is important that the value that is being transferred is visible and clear. That is best achieved by requiring the consideration to be satisfied by a payment of a monetary sum. I repeat that we cannot see any reason why it should not be paid in cash at the time. Let me see whether there is anything further that indicates that we are at all aware of such a problem. No, we are not aware of any such evidence, and therefore invite the hon. Gentleman to withdraw the amendment.

Jonathan Djanogly: The point is that if, for example, a company is paying a dividend and it does not have the cash to pay that dividend, it will seek a loan to pay that dividend. It has the reserves to pay the dividend but not the money. I should have thought that giving the company the adaptability to defer payment terms might, in relation to a purchase of shares—where, of course, the reserve situation is pretty much the same as with paying a dividend—be helpful to it. However, on the basis of what the Minister has said I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 577 disagreed to.

Clauses 578 to 585 disagreed to.

Clause 586

Redenomination of share capital

Jonathan Djanogly: I beg to move amendment No. 455, in clause586,page291,line26,at end add—
‘(8) Where a company proposes to redenominate its share capital or any class of its share capital into another currency pursuant to this section it may by the same resolution convert any share premium account, capital redemption reserve or redenomination reserve into the same currency at the same time and at the same rate of exchange.’.
The purpose of the amendment is to provide a simple method of converting a share premium account, a capital redemption reserve or a redenomination reserve into the same currency if share capital is being redenominated pursuant to the clause. The amendment is tabled at the suggestion of the Law Society.

Vera Baird: While the proposition may seem attractive, the amendment is unnecessary because, in contrast to the position on a company’s share capital, there is nothing in the Bill, or for that matter in the 1985 Act, to prevent companies from redenominating their statutory reserves. The introduction of such a scheme may reduce the flexibility that is currently available to companies to redenominate as they think fit. In short, as there is no statutory bar to redenomination there seems to be no reason to amend the Bill in this way, and I hope that the hon. Gentleman will not press the amendment.

Jonathan Djanogly: On the basis of the Minister’s clarification, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 586 disagreed to.

Clauses 587 to 589 disagreed to.

Clause 590

Reduction of capital in connection with redenomination

Jonathan Djanogly: I beg to move amendment No. 476, in clause590,page292,line42,leave out ‘resolution effecting the’.

John Bercow: With this it will be convenient to discuss amendment No. 477, in clause590,page292,line43,after ‘redenomination’, insert ‘taking effect’.

Jonathan Djanogly: The purpose of the amendments is to provide companies with slightly more flexibility as to the deadline by which they must pass a special resolution to effect the redenomination of share capital. They, too, are tabled at the suggestion of the Law Society.

Vera Baird: The effect of the amendments would potentially be to give the company an additional 28 days—in addition to the three months from the date on which it passed a resolution to redenominate its share capital—to reduce its share capital in connection with that redenomination. The clock would begin ticking when the redenomination took effect, rather than from the date of the resolution to redenominate it. In our view there is already ample time under the Bill to make arrangements for adjusting the value of shares following a redenomination. Most companies will, in any event, want to renominalise the value of their shares at the time when they redenominate. I do not suppose that they would want shares valued at 1.23 or anything of that kind, so they would want to act as quickly as possible. We are not, therefore, persuaded that the amendment is necessary.

Jonathan Djanogly: I thank the Minister for her clarification and I beg to ask leave to withdraw the amendment.

Clause 590 disagreed to.

Clauses 591 and 592 disagreed to.

Clause 593

Register of debenture holders

Question proposed, That the clause stand part of the Bill.

John Bercow: With this it will be convenient to take clauses 594 to 599 stand part and Government new clauses 242 to 258.

Vera Baird: Clause 593 and clauses 594 to 599 are included with no change whatsoever in new clauses 242 to 258. I propose that clause 593 should therefore not stand part of the Bill, and new clauses 242 to 258 should. They fall into two groups, those that simply restate provisions that would have been left in the 1985 Act and those that replace clauses in the Bill. New clauses 242 to 244, 246 and 254 to 258 are simply restatements, new clause 245 replaces clause 583 in so far as it applies to the allotment of debentures, new clauses 247 to 253 replace clauses 593 to 599 and new clauses 247 to 251 are substantially different from the current law but provide similar protection for a register of debenture holders to that which the Bill provides for a register of members. I hope that my fluent persuasion has persuaded everybody that that is the course that we should take.

James Brokenshire: We move briefly to part 20, which concerns debentures. They are obviously instruments that create rights of holders in respect of the company, often constituted by deed polls and other instruments. I have a couple of questions on the clauses and I reserve our rights to further reflect on the new clauses over the summer recess.
In the existing clauses, which are in large part repeated in the new provisions, clause 595 provides a right of challenge by the company in the event that there is a request for inspection or a copy of a register of debenture holders. In many ways, it reflects clause 116, which concerns the rights of inspection of a share register and the ability of the company to challenge on that. Obviously, the clause mirrors in part the regime that governs the share register, but clause 119 provides a provision on share registers whereby the company must provide a copy and must inform on the most recent date to which the register has been made up to. I note that there are certain differences between the registers, but I seek clarification on why such a provision does not appear to be included in the clauses and in the new clauses.
Clause 599 entitles the holders of debentures on request to be provided with a copy of any trust deed for securing the debentures. The term “debenture” in law unfortunately has a number of different definitions. The reference to “securing” prompts a slight conundrum in that regard, as a debenture can denote almost a loan note or some kind of loan stock that a company has constituted to the holder thereof, or a type of security—in other words, a charge over the company’s assets. Although I did not table an amendment to the new clauses, I ask the Minister to consider the phrase “securing the debentures” in clause 599, given the possible double meaning, and consider whether the phrase “regulating or otherwise constituting the terms and condition of the debentures” might offer further clarity when we come back to the more detailed examination of the provisions on Report.

Vera Baird: I certainly accept the second point and, yes, we shall reflect on that. On the first point, I may have to write to the hon. Gentleman. [Interruption.] Or I may not.

Crispin Blunt: It is in Greek.

Vera Baird: I shall look at it the other way up. The provision to which the hon. Member for Hornchurch (James Brokenshire) refers is no longer in existence. The date on which someone becomes a member is much more important. Does that help? If it does not I shall write with a fuller explanation.

James Brokenshire: I am grateful for the Minister’s initial response. I appreciate that there is sensitivity about the time when someone becomes a member. There could also be sensitivity about the time when someone becomes a debenture holder, and the question was therefore whether consideration could be given to reflecting clause 119 in the debenture holder regime. Nevertheless, I am comforted by the Minister’s comments.

Question put and negatived.

Clause 593 disagreed to.

Clauses 594 to 599 disagreed to.

Clause 600

Transfer of securities: power to make regulations

Question proposed, That the clause stand part of the Bill.

John Bercow: With this it will be convenient to consider clauses 601 to 603 stand part and Government new clauses 259 to 280.

Margaret Hodge: I turn now to the part of the Bill that relates to the holding and transfer of shares and other securities. The Government have welcomed the work of industry groups that are examining options for greater use of paper-free holding and transfer. The response to the March 2005 White Paper showed strong support for the initiative, but it is also clear that more information is needed on the costs and benefits of using a paper-free approach more extensively. At this stage the Government do not wish to rule out any option. We therefore propose to extend the existing power relating to evidencing of transfer of securities without a written instrument under section 207 of the Companies Act 1989, so that the power will be capable of use not just to permit, but to require, paper-free holding and transfer of company shares. If the power were used in that way, the Government would want to ensure that the new arrangements for paperless holding and transfer did not deprive individual shareholders of existing rights that might be important to them.
Amendments were tabled in another place to clarify the relationship between section 207 and the provisions in part 21 of the Bill, which make further provision in respect of section 207, and extend it. The Government said that they would seriously consider addressing those concerns by some form of consolidating amendment to part 21, and that is achieved through new causes 270 to 280. We are satisfied that section 207 can be repealed and the new clauses brought into force without in any way affecting the existing regulations made under section 207, or the systems that rely on them.
Finally, clauses 259 to 273 restate provisions of section 183 to 189 of the 1985 Act, which relate to certification and transfer of shares and other securities.

James Brokenshire: I am grateful for that explanation, because the issue is sensitive. At the moment, there is the facility for public companies whose shares are traded on the market to trade through the CREST mechanism, under the Uncertificated Securities Regulations 1995. Part 21 obviously envisages a move towards all such holdings being uncertificated.
I recognise what the Minister has said about protecting existing rights, and it is important that the provisions are not introduced in a way that would cause any problems in that regard. Although some 85 per cent. of shares are held in uncertificated form, taking advantage of the CREST arrangements, there are still some 9 million small shareholders who hold their shares in certificated form, so it would be helpful to have a further explanation of how the provisions might be introduced and, in particular, how they will interrelate with the provisions in part 9 on nominee shareholders and their rights, which we shall discuss shortly.
It would seem logical for the part 9 rights to be introduced first and given an opportunity to bed down, so that if the certificated regime later no longer applies, the range of alternative ways of holding shares is clear to the individuals affected. That aspect ties in clearly with the shareholder democracy issues that we shall debate shortly. In connection with that, further provisions in this part deal with regulations that may affect certain types of company.
It would be helpful if the Minister could elaborate on, or explain the thinking behind, the references to specific types of company and individual or specified companies. Are we talking about the size of the company or would that type of provision be used in other ways? It would be helpful to receive further clarification on the thought behind the regulation and the order-making process, which refers to certain companies perhaps being exempting, and on how things would work in practice.
Such procedures are valuable and important in ensuring greater deregulation, facilitating trade and reducing the burdens on companies in respect of how they relate to their shareholders. However, we need a proper opportunity to ensure that any details are properly consulted on, that shareholders are properly presented with their choices and that, for shareholder democracy, their rights are protected under the new regime that would operate if and when part 21 is brought into effect.

Margaret Hodge: I do not think that there is much difference between us on that. There are about 10,000 paper transactions a day, so a lot of people clearly still prefer to use that method. We need to see what comes out of the consultation paper that the Institute of Chartered Secretaries and Administrators produced in April. We are committed to making any necessary cost-benefit calculations before taking any step forward. All that we are doing at this stage is taking a power that will enable us—of course, after appropriate consultation with all parties and ensuring that all shareholder rights are firmly entrenched—to move from a voluntary to a compulsory paperless transaction environment.
The hon. Gentleman made a perfectly valid point about various forms of different companies. As we take the consultation forward and move in that direction, we need to ensure that we look at the specific requirements, depending on the company form, so we are with him on that one.

Clause 600 disagreed to.

Clauses 601 to 603 disagreed to.

Clause 681

Voluntary striking off: extension to public companies

Question proposed, That the clause stand part of the Bill.

John Bercow: With this it will be convenient to discuss clauses 682 to 693 stand part and Government new clauses 376 to 410.

Margaret Hodge: I shall be brief. This is a further batch of restated clauses. As things stand, the provisions relating to the ways in which the registrar may strike a company off the register are contained in the 1985 Act, while provisions relating to the ways in which companies, once struck off the register, can be restored to it are contained in the Bill. It is logical to bring together the two sets of provisions, and the new clauses will do so. No change of policy is intended, and as we reflect on the wording of the clauses during the summer, we will ensure that that is the case.

Jonathan Djanogly: As the Minister says, this is one for the summer.

Question put and negatived.

Clause 681 disagreed to.

Clause 682 disagreed to.

Clause 683

Application for administrative restoration to the register

Jonathan Djanogly: I beg to move amendment No. 373, in clause 683, page 339, line 8, leave out subsection (3).

John Bercow: With this it will be convenient to discuss amendment No. 374, in clause 683, page339,line9,at end insert
‘, or by his relatives or beneficiaries under his will’.

Jonathan Djanogly: These two probing amendments would provide a new mechanism for restoring a struck-off company to the register. I note that subsection (3) says that an application
“may only be made by a former director or former member of the company.”
Will the Minister explain why? Why should a creditor or litigant, or the relative or beneficiary of the will of a former director or member, not have the same right?

Margaret Hodge: The answer is simply that we are introducing a new administrative procedure recommended by the company law review. It will in no way prevent people from using the courts to pursue their rights in other ways. If one tried to extend the right to relatives or other people, definitions would become extremely difficult. We chose to use easy administrative procedures for former directors or members and not to extend the law beyond that, allowing court procedures for other cases.

Jonathan Djanogly: I hear what the Minister is saying. In practice, it is a rapid procedure that works well for shell companies or companies with no liabilities. However, at times, companies can still be left with assets or liabilities, and creditors can be left short. I appreciate that other mechanisms that can be used, and I thought that they might be pulled together, but on the basis of what she said, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 683 disagreed to.

Clauses 684 to 693 disagreed to.

Clause 138

Enjoyment or exercise of members’ rights

Jonathan Djanogly: I beg to move amendment No. 71, in clause138,page61,line31,leave out from beginning to ‘deemed’ and insert
‘Where a company is entitled by virtue of paragraph 7(2) of Schedule 7 to use electronic communications, the company is then’.

John Bercow: With this it will be convenient to discuss the following: amendment No. 74, in clause138,page61,line31,leave out subsections (1) to (3) and insert—
‘(1) The Secretary of State shall by regulations, make provision to ensure that a nominated person, where he—
(a) is the beneficial owner of the interest in the company;
(b) retains the right to transfer or otherwise dispose of the whole or part of that person’s beneficial interest in the company;
(c) has elected to—
(i) receive documents and information that the member is entitled to receive from the company; and
(ii) enjoy or exercise all or any specified rights of the member in relation to the company if he so wishes; and
(d) is entitled to—
(i) receive all the documents and information that the member is entitled to receive from the company; and
(ii) enjoy or exercise all other rights of the member in relation to the company.
(2) Those regulations shall apply, in particular, to the rights conferred by—
(a) in the case of subsection (1)(a)—
(i) sections 268 and 270 (right to be sent proposed written resolution);
(ii) section 286 (right to notice of general meetings);
(iii) section 399 (right to be sent a copy of annual accounts and reports); and
(b) in the case of subsection (1)(b)—
(i) section 269 (right to require circulation of written resolution);
(ii) section 279 (right to require directors to call general meeting);
(iii) section 290 (right to require circulation of a statement);
(iv) section 299 (right to appoint proxy to act at meeting);
(v) section 313 (right to require circulation of resolution for AGM of public company); and
(vi) all such other rights (not within subsection (1)(a)) as a member would otherwise enjoy (in accordance with any provision of the Companies Acts).
(3) The regulations referred to in subsection (1)—
(a) shall be made by statutory instrument before 1st May 2008, and
(b) may not be made unless a draft has been laid before and approved by resolution of each House of Parliament.’.
Amendment No. 68, in clause138,page61,line31,after ‘companies’, insert ‘whose shares are’.
Amendment No. 251, in clause138,page61,line31,after ‘companies’, insert ‘whose ordinary shares are’.
Amendment No. 69, in clause138,page61,line34,leave out paragraphs (a) and (b) and insert—
‘(a) receive all the documents and information that the member is entitled to receive from the company; and
(b) enjoy or exercise all other rights of the member in relation to the company’.
Amendment No. 70, in clause138,page62,line3,leave out subsection (3) and insert—
‘(3) This applies, in particular, to the rights conferred by—
(a) in the case of subsection 1(a)—
(i) sections 268 and 270 (right to be sent proposed written resolution);
(ii) section 286 (right to notice of general meetings);
(iii) section 399 (right to be sent a copy of annual accounts and reports);
(b) in the case of subsection 1(b);
(i) section 269 (right to require circulation of written resolution);
(ii) section 279 (right to require directors to call general meeting);
(iii) section 290 (right to require circulation of a statement);
(iv) section 299 (right to appoint proxy to act at meeting);
(v) section 313 (right to require circulation of resolution of AGM of public company); and
(vi) all such other rights (not within subsection 1(a)) as a member would otherwise enjoy (in accordance with any provision of the Companies Acts).’.
Amendment No. 250, in clause138,page62,line3,after ‘rights’, insert
‘to attend a general meeting and to vote at it, and’.
Amendment No. 72, in clause138,page62,line19,at end add—
‘(5) For the purposes of section 138 of this Act, the nominated person shall include only those individuals, or their representatives, where:
(a) the nominated person is the beneficial owner of the interest in the company;
(b) the nominated person retains the right to transfer or otherwise dispose of the whole or part of that person’s beneficial interest in the company; and
(c) the nominated person has elected to
(i) receive documents and information that the member is entitled to receive from the company; and
(ii) be able to enjoy or exercise all or any specified rights of the member in relation to the company if he so wishes.’.
Amendment No. 73, in clause138,page62,line19,at end insert—
‘(6) A member may only nominate a person whom the member knows or has reasonable cause to believe to be interested in the shares in relation to which the nomination will operate, or a person specified by that person.’.
Clause stand part.
Government new clauses 36 to 44.

Jonathan Djanogly: We move on to part 9, “Exercise of members’ rights”. The list of amendments gives some indication of the interest that all parties take in the provisions. They have proved to be some of the most controversial and widely reported provisions in the Bill. The exercise of members’ rights is an important issue, and the Conservative party feels strongly about it.
The position has moved on significantly since we tabled the amendments. I shall address the issues in the context of the Government’s new clauses, which we welcome and which form the substantive position for debate today. In our view, there should be a link between a person who has chosen to invest in a company’s shares and that company. Once a person invests his money in a company, a line of trust is created; it is a thread that runs directly between the company and the person who has chosen to risk his money by investing in it. The law should acknowledge and respect that.
There are myriad ways of investing one’s money in a company. While it is still possible to buy shares in one’s own name, it is increasingly common, especially among small investors, to arrange instead for the shares to be held in the name of a nominee. However, where group arrangements are used, it is often the case that a nominee account holder is put down as the legal owner of the shares, whereas the beneficial or actual owner of the shares is somebody quite different—the person who has paid money to invest in the company rather than that nominee or broker.
Let me give an idea of the extent of the practice by mentioning some statistics. We are told that nearly 50 per cent. of all private shareholdings are now administered by nominees. Whereas there are 26 million certified shareholdings, there are now 24 nominee-based shareholdings. It is estimated, therefore, that £100 billion-worth of share capital is held in that way. The owners of those 24 million shareholdings held in nominee accounts should benefit from shareholder democracy. At present, they have no rights in the companies in which they have chosen to invest money. They cannot vote on matters that are normally voted upon by shareholders, nor do they have a right to receive any of the information that is normally received by shareholders.
The Government have now gone some way towards heeding our calls, but it is only fair to set out the views to those who have campaigned hard on both sides. Over the past 20 years, while shareholder groups such as The Share Centre, the United Kingdom Shareholders Association and the Association of Private Client Investment Managers and Stockbrokers have lobbied for such enfranchisement, registrars and various corporate groups have lobbied against it. Although many of the briefings that I have received relate to the old drafting of the clause, the groups’ points are still pertinent. We have received a great deal of information from a wide range of companies and groups that feel strongly. The CBI and some of its members have expressed concerns about the clause in relation to indirect investors and have mentioned the costs and burdens that they feel could be imposed on listed companies should it come into effect.
We have listened carefully. Mechanisms are already in place for beneficial shareholders to choose to vote in some circumstances, and more and more publicly listed companies place their annual reports and other information on their websites. Many of the companies to which we have spoken have indicated that they would be happy to provide information to any beneficial shareholder who might contact them. However, although systems are in place, we need to do more to encourage active shareholder participation. A representative of one major public limited company told us that the clause was not necessary because few of the private investors in his company vote. We would support an update in the law because the corporate environment is not healthy; private investors do not engage enough in the running of what are, essentially, their companies. In some limited companies, only 7 per cent. of private investors vote. That should be just as unacceptable as falling national and local electoral votes.

James Brokenshire: My hon. Friend makes a powerful point about the need for greater shareholder democracy. Does he share my dismay that, at plc AGMs, the advisers often significantly outnumber the shareholders? That starts to bring the process into disrepute, so there is a need to encourage greater participation, engagement and involvement of shareholders in their companies.

Jonathan Djanogly: My hon. Friend makes a good point. We have all been there, and that is often the norm for small and medium-sized listed companies. However, while that situation is typical, we should not accept it; we want to move away from it. The Conservative party stands for increased shareholder democracy. In an ideal world, all private shareholders would use the avenues there are to obtain the information available, but in practical terms, unless they are given the choice to opt in, few will. In an ideal world, all issuers would take a positive interest in the beneficial owners of their shares and give them the option to receive information. Unfortunately, that does not occur. A voluntary system is in place and it does not work very well. Electronic communication and CREST are delivering significant cost-savings to companies, but the success of technology should not mean that members’ rights are destroyed. The system needs to be adapted to cater for technology.
Many of the anxieties that businesses have expressed about the clause concern the cost to the issuer. We believe that it will not be as great as many fear. Thevast majority of communications, for voting or information, will be electronic, which is quick, easy and far cheaper than conventional postage delivery systems. As issuers already send electronic communications to those with a full shareholding who want them, it would not be a significant cost burden to increase the volume of those communications to take into account those with a beneficial interest.
There have been various criticisms from the Institute of Chartered Secretaries and Administrators, the Royal Institution of Chartered Surveyors, the Law Society and the Institute of Directors. The ICSA expressed reservations, including concerns about the practical implementation of the new system and the lack of obligations imposed upon the member, but its primary concern is about cost. The Law Society expressed anxiety about the legal workings of clause 138. It is important to hear from the larger brokers themselves, and I mention one in particular. We received an e-mail from the Halifax, on behalf of Halifax Share Dealing Ltd which states:
“We are delighted with the new clause 138. It has proposed a Government amendment to the Company Law Reform Bill... covering shareholders’ right. HSDL is one of the UK’s largest execution-only stockholders with regulatory responsibility for a number of nominee companies in which we hold shareholdings on behalf of 2.3 million retail investors. Whenever and where possible we try to obtain for our customers the same rights as they would have if they were registered in their own right. However, to do so we have to depend on the whim of registrars and regrettably all too frequently they are not willing to help us provide these rights which we strongly believe that our customers, who are investors in these companies, are entitled to. We have campaigned long for these rights and as you are aware we are part of the Shareholders’ Rights Alliance.”
The e-mail ends by saying:
“On behalf of our customers and those of other nominee operators it is our fervent hope that the amendment will remain in place and that the moral right of investors will prevail over the profit motives of a small number of interested parties.”
The depth of feeling on the issue runs deep; only a couple of weeks ago my hon. Friends on the Committee, the shadow Secretary of State and I joined a rally just outside Parliament supporting the people campaigning for these rights. We are glad, and many shareholders are relieved, that the Government have seen the right way forward on the issue and tabled a new set of amendments to the Bill. Having said that, they were tabled very late in the day, which allowed little time for a contribution on the clauses.
I shall explain briefly why we do not support the voluntary extension of shareholders’ rights. Our view is that when possible the industry should lead without the need for the Government to legislate. However, in this case, if the extension of shareholders’ rights was allowed to be voluntary for companies, the status quo would simply remain. The shareholder groups we have spoken to have been lobbying for nominee shareholder enfranchisement for nearly 20 years. In that time, relatively few companies have chosen to extend normal shareholder rights to nominee shareholders. If little has changed in the last 20 years there seems little reason to believe that it will change much in the next 20 years before this House considers company reform again.
We are glad that the Government are coming round to our point of view, but I want to note some of the problems that have arisen as a result of the measure, because ultimately it has become reactive law, made somewhat on the hoof. Although we support and welcome the reversal, it should have come sooner so that all interested parties could have been given a proper amount of time to consider this important issue.
We were provided with draft clauses on 11 July and the Minister set out the significant consultation that there has been on the proposals. Although it is probably going too far to say that every party has everything it wanted, we are much closer to consensus than we might otherwise have been. We recognise the Minister’s efforts in that regard.
The Minister will recognise that we will need to hear what interested parties have to say. Although we reserve our right to return to this matter on Report, the measure is only possible in relation to detail, rather than form, which is broadly acceptable. However, I should like to mention some specific points.
Yesterday afternoon, we received comments from the Law Society, which moved very fast, dealing with various issues that the Government will need to consider over the summer. Perhaps the Minister has not received those comments yet; although I am sure that she will, I shall mention some of them so she can hear what the Law Society is saying. I have not had time to consider those comments in detail myself, so that is another thing to do in the summer.
The Law Society, in respect of clause 2(3), says:
“The definition of ‘information rights’ refers to a right to receive ‘a copy of all communications that the company sends to its members generally’. It is not linked to the information rights that the shareholder, as a matter of fact, possesses. For example, articles may include a provision stating that overseas shareholders are not entitled to notices of meetings unless they provide an address for communications in the UK.”
In respect of clause 2(5), it says:
“In Clause 2(5)(a), replace ‘(2)(a)’ with ‘(3)(a)’. In Clause 2(5)(b), replace ‘(2)(b)’ with ‘(3)(b)’.”
I do not expect the Minister to respond immediately to these technical points; I am putting them on the record.
The Law Society says that clause 3
“should provide that a nomination ceases to have effect if the nominated person ceases to own the shares beneficially. Equally, it seems that the member or nominated person should be required to notify the company of this situation.”
On clause 3(2) it says:
“It is not clear whether in the case of shares held by more than one member, all those members need to request the nomination to be terminated. Clause 3(2) should provide that the member or nominated person must notify the company of the termination of a nomination.”
The Law Society says that the provisions in clause 4
“do not encompass the concepts in the articles of association for how notices are served and communications made to shareholders which would also need to apply to the information rights of nominated persons.”
It wants to
“Delete the last reference to ‘appointed’.”
in clause 5(2)(a).
On clause 6, the Law Society states:
“The rights introduced by this clause are highly likely to give rise to unforeseen practical difficulties and issues in relation to corporate actions. Clause 6 is also unclear. Does a member to whom the section applies ‘exercise his rights’ within the meaning of the section...only when he exercises all the rights directly himself...only in respect of those of the rights which he elects to exercise directly himself; or...also in respect of rights which are exercised directly by persons whom he has nominated?
If a member, without having made any nomination, exercises his rights in two different ways, does he automatically fall within this clause? If so, this should be made clear.
If the clause also applies to a member (A) who has nominated another person (B) in respect of certain of his shares, (a) does the member only ‘exercise his rights’ if he exercises them in respect of the remainder of his shares, or (b) does the member also ‘exercise his rights’ in respect of rights exercised by B?”
In clause 6(1), it would like to
“Replace ‘person’ with ‘member’.”
On clause 7, the Law Society states:
“At clause 7(2)(e) we question whether the computation of the total amount of the sums paid up will be mathematically correct. The members’ request must already have the support of ‘100 persons’...It is hard to understand, therefore, why the calculation requires the division of the relevant aggregate nominal value by the number of persons named in the request which will in any event ‘name’ the registered holder.
We also envisage uncertainties arising under Clause 7(2)(c)(ii) as to when the nominee holds shares “in the course of a business’”.
I have put those points on the record. We are where we are in terms of timing, but the Minister will have my party’s full co-operation in making clause 138 work, if the changes that are required arise.
Under the new clauses as they are currently drafted, there will be no compulsion on a broker to provide the relevant services. The relationship between the broker and the company, rather than the company and the customer, which is envisaged in the clauses, means that there is no compulsion on the broker to provide the services to shareholders. In reality, however, we appreciate that it will be for the shareholder to choose a broker who supplies such services. That needs to be put on the record.
It is also worth noting that the default position for the delivery of information under the new clauses is electronic delivery. From the cost perspective, that is the right approach, but we must consider the remaining issue of the cost to the company if a beneficial shareholder chooses to opt in for hard copies of information, rather than electronic copies. I would appreciate it if the Minister confirmed that her Department will keep that aspect under review.
The Government originally used the issue of cost against the approach that they are now taking; the implementation of the system may well involve increased costs to companies, especially if many shareholders choose to opt for hard copies of the information. However, I put it on record that we believe that those marginally increased costs will be greatly outweighed by the savings that companies have borne from the use of nominee shareholders and the CREST share trading system. Again, we agree that the issue should be reviewed in due course.
The electronic CREST system is used in the vast majority of those share owning situations, whether the shares are bought by means of an individual savings account, personal equity plan or other similar arrangement. That saves a lot of time and money, as all the information is held electronically. The enfranchisement of beneficial shareholders is a natural progression in the modernisation of our company law. Nominee accounts have brought a great deal of efficiency to the UK stock market and enabled more electronic trading and settlement.
If we put the estimated £6 million per annum that this new system will cost all UK companies against the savings brought about by CREST, it seems clear that we are evolving the UK shareholding system for very little real cost. That is an essential development if we are to have a participative public financial market.
The Government have not introduced any criminal sanctions into this part of the Bill. We accept that that is right in the circumstances; indeed, it is a pity that the Government have not taken that less heavy-handed approach to other parts of the Bill. We also recognise the fact that stockbrokers have the right and ability to split votes of shares that they hold as a block. That is the right approach. Previously, the Government had argued that the increasingly complex investment claims in place precluded a one-size-fits-all approach to the enfranchisement of indirect shareholders. At thetime, they missed the point that the vast majority of individual shareholders who are currently disfranchised hold their shares through nominee operators. The names of those operators appear on the register of members; it is not a complex investment chain.
I should also point out that under the Bill the company will need a list of people who require information. We should like to receive confirmation from the Minister that the law provides for that list to be kept confidential and that the list will not be used by the company for other or inappropriate reasons. The company will send out a letter explaining that people’s rights will need to be actioned through their nominees. Will that letter be in the standard Financial Services Authority format? Has the Minister devised the law in conjunction with the FSA? If she has not, will she confirm whether that will be done?
We also note that the provisions apply only to companies operating in regulated markets. They will not apply to unregulated markets such as the alternative investment market or the off-exchange market. Will the Minister justify why she took that decision? Will the Government inform us about when they intend to review the position in due course?
Overall, I should like to commend the Government for finally seeing sense on the issue and coming round to our point of view. I also recognise the swift work that the Minister and her officials, having made the decision to change the Government’s approach, did to produce the clause and consult relatively widely on it in the short time available.
The rights of shareholders are important, and not just within the narrow definition of allowing them to receive information and votes. Shareholder rights and responsible shareholder activism are the central drivers of increasing corporate social responsibility and ethical behaviour. An important step in furthering those goals has been taken today. There is still work to be done to fine-tune the clauses. As I said, I shall be happy to discuss that with the Minister over the summer. For now, I shall recommend that my hon. Friends support the Government’s amendments.

Quentin Davies: May I take up my hon. Friend straight away on his point about the lack of criminal sanctions in the clause? I read the clause to mean that articles of association are deemed to have those provisions, whether they are there or not, and that the redress for nominee or beneficial shareholders—
Margaret Hodgeindicated dissent.

Quentin Davies: But the clause states:
“All companies admitted to trading on a regulated market are deemed within the company’s articles to have a provision”
and so on. As I understand it, the clause deems that certain provisions exist in a company’s articles of association; they are there for the purposes of the law, whether the company bothers to put them in or not. The redress to nominee shareholders, beneficial shareholders or anybody else against the provisions not being observed is simply the sanctions against directors who act in breach of the articles of association already dealt with in an earlier part of the Bill. The Minister shook her head, so if my understanding is wrong, I hope that she will intervene on me or explain the position to the Committee. We should not go any further without understanding what the Bill purports to say.

Margaret Hodge: I shook my head because from our discussions with stakeholders, it was clear that we would not make the provision a criminal sanction. I am trying to find the provision—I think that the hon. Gentleman might be referring to the Opposition clause that was inserted in the Bill in the Lords, rather than our new clause.

Quentin Davies: On the contrary, I am reading from the text. We all have the same text, volume I of the Company Law Reform Bill, and I shall repeat the details. Clause 138 states:
“Enjoyment or exercise of members’ rights
(1) All companies admitted to trading on a regulated market are deemed within the company’s articles to have a provision to enable members to nominate another person”,
and so on.

David Howarth: rose—

Quentin Davies: I give way to the hon. Gentleman.
Margaret Hodgerose—

Quentin Davies: Well—

John Bercow: Order. To whom does the hon. Gentleman want to give way?

Quentin Davies: I shall give way to the hon. Member for Cambridge (David Howarth).

David Howarth: Clause 138 was the result of a successful Opposition motion in the House of Lords. It is, I suppose, the Opposition’s text. The Government will presumably propose that it does not stand part of the Bill and that it is replaced by their new clause.

Quentin Davies: I give way to the Minister.

Margaret Hodge: I suggest that the hon. Member for Grantham and Stamford looks at new clauses 38 and 39, which is where we want to end up.

Quentin Davies: I admit that this was a perverse thing to do in Committee, but I was addressing the text before us. Perhaps I shall return to the subject if I find a similar anomaly in the new clause.
The issue is important, because, as my hon. Friend the Member for Huntingdon (Mr. Djanogly) has said, an increasing number of people—beneficial shareholders and investors—choose to hold their shares via nominee accounts. In the overwhelming majority of cases, their reasons are entirely respectable—there are often economic reasons, to which my hon. Friend has referred, because modern technology often makes it the administratively cheapest way of holding shares.
We should note that in this country the Government have forced certain classes of investor to hold their shares through nominees. This Government have used Taxes Acts to compel people who want to obtain basic tax benefits to hold their shares in that way. Self-invested pension funds and ISAs are good examples—in both cases, if one puts one’s name on the shareholder register, one does not get the tax break. The Government have pushed investors in that direction, and it has been a mistake, because the shareholders, investors and savers have had to give away at least part, and sometimes a substantial part, of the tax benefit to the company running the vehicle—a toll to their scheme’s gatekeeper. A large proportion of the funds generated by those tax provisions have flowed not from the generality of taxpayers to those taxpayers who save, which was the purported intention, so as to increase the inducement to save, but away from the generality of taxpayers to a number of firms and institutions. Many of those firms and institutions are in the square mile, and they have done well out of selling those products.
I agree with the Government that there was a conflict between economic rationality and HM Revenue and Customs caution, which was arguably excessive, about the danger of tax avoidance. In that particular conflict, the Revenue won, and whatever the reason for that may have been, we have compelled certain classes of investor to invest through nominees, and it is therefore our obligation to ensure that they do not lose their shareholder rights as a result. It seems to me to be quite wrong economically, for shareholder democracy and in terms of equity for that to happen. The purpose of the clause—I can debate only the clause before us—is to redress that anomaly.
Two of the amendments to clause 138 are in my name. Someone is bound to tell me that they amend a text that will be voted against—in a few moments, the text will cease to exist—but I cannot anticipate the Committee’s decision and must debate the text before us. I shall endeavour to change the text, because I think that it can be improved.
I tabled amendment No. 251 at the suggestion and behest of the CBI, which lobbied me—I hope the CBI will not mind my passing on that conversation—to vote against the clause. I am not going to do so, as I very much support the idea of protecting shareholder rights, even if people decide or are forced to invest via nominees. However, having heard a litany of complaints from various companies about the cost of the imposition, I agreed to consider whether there might be merit in restricting the beneficiaries of the new rights to holders of ordinary shares. I am not sure whether that would greatly reduce the aggregate financial cost to companies, because the vast majority of shareholders hold ordinary shares. I think that a good case can be made for giving other forms of shareholder—preference shareholders and so forth—the same democratic rights in their companies. I do not wish to pursue that amendment any further.
Amendment No. 250 arises from an anomaly that struck me when I first read the Bill. The clause purports to preserve certain essential rights for those who invest via nominees. Subsection (1)(b) states that we are trying to provide for such shareholders to
“enjoy or exercise all or any specified rights”.
However, subsection (3) states that “This applies in particular” to a set of designated rights. The most curious thing—I still cannot understand how the omission could have occurred—is that the clause does not mention the most important right, which is the right to attend meetings, whether exceptional or not, and the right to vote at such meetings.
For the avoidance of all possible doubt, we should proclaim loud and clear to the public and to all investors that it is Parliament’s intention to provide in the clause for that right to be continued to be exercisable, even if people have invested via an intermediary or a nominee. That is the purpose of amendment No. 250. I may be told that I have missed the relevant provision and that that right is preserved elsewhere, but it is curious, when a large number of rights are spelled out in subsection (3), that arguably the most important right should be omitted.

David Howarth: As I said in an intervention on the hon. Gentleman, the existing text is the result of an amendment passed with Opposition votes in the other place, and I record my gratitude to Lord Razzall and Lord Sharman for their part in that.
The purpose of the clause is to further the enfranchisement of indirect investors, which it does for two important reasons. The first reason concerns the accountability of companies to society, not just to fund managers—with all respect to fund managers, they are less representative of society than the great mass of shareholders. The second reason is to encourage participation in the corporate side of the economy, which involves information being spread among the general public about how companies work so that they have an understanding of the problems that companies face.
The Government raised a number of practical objections to the clause, as passed by the other place, especially on cost and flexibility. For example, at the heart of the proposal about voting rights is the question of the cost and the difficulty of organising annual meetings and votes, especially of large companies, and at the heart of the proposal about information was the expense of preparing hard copy documents for large numbers of people. We said on Second Reading that we were fully prepared to think about those objections, and after consulting widely, the Minister has come back with these proposals as a replacement for clause 138.
We are content to go forward on the basis of the compromise that the Minister has brokered, although the information side of the compromise is clearer than the voting side. The proposal is now that the default option will be electronic communication and that that there will be an option to opt in for hard copy, although in normal circumstances information will be transferred electronically, which meets the cost objection. On voting rights, the Government have not accepted our view, but they at least accept that they have a role in helping to create a market.
As the hon. Member for Huntingdon has mentioned, the Government’s proposal effectively provides information for indirect investors about whether the nominee that they have chosen allows them to act as proxies in the company’s governance structure. That would allow individual indirect investors to choose a nominee or an institutional investor who offers that service, which helps to create a market for that service itself. It will then be for individuals to decide whether that is a service that they value. If they value it, they will be able to choose the nominee who offers that aspect of investment.
It remains to be seen whether that pure market approach will deliver the social benefits that I have mentioned. It is possible that it might do so, although it is also possible that it might not be enough. The benefits that interest us in clause 138 are essentially social benefits rather than benefits accruing to the companies or the investors themselves. It might be that a pure market approach does not deliver those social benefits.

Quentin Davies: Does the hon. Gentleman agree that investors choose fund managers on the basis of two criteria—first, the perceived quality of the fund management and, secondly, the cost? In the case of passively invested rather than actively invested funds, their choice will be based entirely on cost, and they will not take into account the offer to allow them to act as proxies at AGMs. If he wishes to give investors that right, he should vote for my amendment rather than for this new clause.

David Howarth: I accept what the hon. Gentleman has said to the extent that those two factors are the most important that investors will take into account. It is up to them what they take into account, and we will see the extent to which this right is exercised through the market. As I have said, if enfranchisement does not deliver the social benefits that we envisage, it might be necessary to propose a further move forward, perhaps to a default option, where voting rights are transferred but investors can opt out and give those rights back to the nominee. Nevertheless, I am perfectly willing to accept the Government’s present position as a starting point from which to move forward.
A number of smaller matters are outstanding, such as the list of drafting issues put forward by the Law Society, which the hon. Member for Huntingdon mentioned. I shall not repeat them, but I wish to mention one final small issue, which is of interest to a lot of small shareholders. It is how the arrangements will deal with shareholders’ perks. I remember once having a conversation with someone who is now a prominent economist, who told me that he had just bought shares in the channel tunnel company solely to get the perk of cheap rail travel. He envisaged that, given the size and difficulty of the project, the value of the shares was likely eventually to fall to zero. However, it was worth while buying the shares simply for the perks. Will the Minister address that aspect of shareholding?
As the hon. Member for Huntingdon said, we accept that the Government have moved a long way and accepted that they have a role in creating a market. We thought that they should have such a role in our other area of concern about the business review—the environmental and social practices of companies. That is a legitimate way forward, and we are happy to accept as a compromise the Government’s offer today.

Margaret Hodge: We will end on consensus; I cannot believe it. It is a good way to end our lengthy consideration of the Bill. I shall start by saying that on this issue, on which I came in at a much earlier stage than on others discussed in Committee, I was grateful to all the stakeholders. They worked incredibly fast and hard to try to reach a compromise and consensus. I attended three meetings, and my officials attended others. There are conflicts in approach, and the issue of cost looms high on the agenda of the companies involved, and the compromise and consensus that we have reached is down to them, facilitated by us. I am grateful to all the stakeholders involved.
I agree that there is consensus on the importance of the matter. Part of the underlying thinking that led us to devise the Bill was the intention to strengthen shareholder rights. We have attempted to do so throughout, and the position that we reached before the House of Lords debate was that the costs involved provided an overwhelming argument to companies. Opposition Members recognised that the clause as it came to us from the Lords would not have been workable and would have imposed unfair burdens on companies. We have now found a good way forward, not going as far as the hon. Member for Cambridge would like, although I am told that Marks and Spencer has included a note with its recent vouchers inviting nominees to let them know details of indirect shareholders. We hope to see such practice spread to other companies.
We may well return to the issue, because there is consensus in the room that there will be growth in direct shareholders, so entrenching their rights will be ever more important.

Paul Farrelly: I congratulate my right hon. Friend and her fellow Ministers on the Front Bench on the fact that, in the many sittings of the Committee, when serious and credible comments have been made in our scrutiny of the Bill, the Government have sought consensus. That is demonstrated now.

Margaret Hodge: I thank my hon. Friend for those remarks. My first duty as a new Member on entering the House after a by-election—this is a slightly old anecdote—was to sit on a Bill Committee, and any amendment tabled by the Opposition, who were us in those days, was simply ignored. I determined then that that would never be the way in which I acted when responsible for Committees. Good ideas, wherever they come from, need to be absorbed. We have done that during our consideration of the Bill. We shall return to the issue, but we have taken important first steps on a consensual basis.
I cannot avoid saying that I am delighted that the Conservative party supports increased shareholder democracy. However, that should stretch right the way through to include shareholders having the right to know about a company’s activities and policies when they impact on the environment, community and other issues discussed earlier in the Bill. I look forward to its wholehearted support for those clauses when we return to them on Report.
I shall respond to the Law Society’s amendments. I have not seen the letter, but my officials have. I think that it was responding to an earlier draft of the clauses—there have been a couple—but nevertheless, if it has pertinent concerns, we will of course come back to them. We will keep the cost of hard copies under review. I gave that commitment to the companies that negotiated with us and I am happy to put it on the record today. The list that companies will need to keep will ensure that information passed to their indirect shareholders is protected under the Data Protection Act 1998 and that confidentiality is maintained. Clause 42 contains powers to extend those indirect shareholder rights to the AIM list and others, if appropriate.
The hon. Member for Grantham and Stamford (Mr. Davies) asked about the voting rights of indirect investors. Clause 307 deals with that matter, but again we might want to return to it at a later stage. We looked at providing for such voting rights, but it would have required all indirect investors to be identified and reported. That would have been a huge job and would have added to the complications. I was anxious to build a way forward.
In the remaining minutes I shall take Members through what I have in front of me. We think that everyone who invests in shares—directly in a company or through a nominee broker—should be able to enjoy and exercise much the same rights as other shareholders. If indirect investors wish to exercise shareholder governance rights, they should be able to do so. I think that that is the unanimous view in Committee.
Our key concern, however, has always been that such enfranchisement be achieved in a way that is proportionate, offers flexibility and avoids imposing undue burdens on parties involved, whether issuers, investors or intermediaries. That is why, on Second Reading, we said that we would look at reversing the Opposition’s amendments and why we have tabled the new clauses. Also on Second Reading, we made it clear that we would meet interested parties to discuss other ways in which to strengthen the position of indirect investors. We have done that, which has enabled us to move to the new clauses.
Briefly, I shall outline how the new provisions will operate. The new clauses provide that indirect investors can be nominated to receive company mailings. It is up to the registered member—typically, a broker—to decide whether to nominate. The registered member will be able to appoint indirect investors as proxies under the provisions in part 13 so that they can exercise their voting rights.
Clauses at the end of new part 9 will make it easier for registered members to exercise rights in different ways to reflect underlying holdings and to allow indirect investors to participate in, for example, requests for resolutions at the AGM. We think that that is a balanced package. One of our key concerns in finding a way forward has been proportionality and avoiding unnecessary cost burdens on companies or any other parties. I was keen to explore cost implications in our discussions with interested parties, and I recognise that our proposals still involve extra costs being borne by different participants. There will be some incremental costs for companies in printing additional copies of their annual report and accounts, but we understand that roughly 70 per cent. of London listed companies are already happy to send copies of those to anyone on request.
The other extra cost for companies will be that of maintaining a list of those nominated to receive the company mailings under the new procedure. We have addressed those concerns by requiring a positive opt-in by indirect investors to hard copy information and by ensuring the validity of, for example, company meetings is not affected by failure to send communications to indirect investors.
As for brokers, they will need to bear the costs of marshalling, for example, proxy voting rights and instructing the company accordingly, if they wish to pass on such rights to nominee investors. It will be up to indirect investors, as the hon. Member for Huntingdon said, to choose a broker who offers such rights as part of their service.
In bringing forward the new clauses, I want again to put on record our appreciation of the organisations with which we negotiated: the CBI, the Institute for Chartered Secretaries and Administrators, the Association of Private Client Investment and Management Services and the London stock exchange, as well as a number of individual brokers and issuers. We have already—which is why I was surprised—received helpful input from the Law Society and the TUC. We have involved both those who inspired the Opposition amendment in the first place and those who subsequently objected to it, which was the right way forward. I am glad of the opportunity that we had to share our thinking on that and other developments with both Opposition parties in advance of our Committee debates.
New clauses 36 to 44 are good news for everybody—for both small investors and quoted companies. I therefore commend them to the Committee and oppose clause 138 standing part of the Bill. I hope on that basis that hon. Members will not press their amendments.

James Brokenshire: I am grateful to the Minister for setting out the debate and how we have moved forward on this significant and important matter. I put on record the Opposition’s thanks for the work of Lord Hodgson in initially highlighting the issue. We have since sought to come up with a mechanism and a workable approach.
I note that there is still further reflection and consideration to be undertaken. I heard the reservations expressed by the hon. Member for Cambridge about whether the new clauses go far enough, but it is fair to say that a consensus has been reached, building on the input of various stakeholders, broadly reflecting the need to ensure that nominee shareholders are given rights and that that is recognised in the Bill.
I note that the Minister commented on cost. Gavin Oldman, chief executive of the Share Centre, a private client stockbroker, said:
“We think only 5 per cent. of shareholders would opt in to receive information from companies. That is 1.2 million nominee shareholders costing say £5 a year, a total of £6 million. That is an insignificant amount compared with the estimated £100 million companies would save from being allowed to disseminate information electronically, which would also be allowed by the Bill.”
I suppose that that shows one view on the cost issue. I recognise that various stakeholders expressed some concern about the implications of costs, but I hope that by virtue of the debate we have arrived at a broadly acceptable point.
My hon. Friend the Member for Huntingdon pointed out the implications on the AIM market and OFEX. We could give some further consideration to that. It is odd that shares traded on the official market and the nominee shareholders of those companies should be treated differently. We can reflect on that further.
The debate has been productive. I am pleased that we have been able to secure some positive steps forward, to put shareholder democracy and nominee shareholders at the forefront. I hope that, in so doing, we can ensure that more people take a much more active role in shareholder democracy and engage more readily with their companies.

Jonathan Djanogly: I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.
 “It being Two o’clock, THE CHAIRMAN proceeded, pursuant to Standing Order 83D and the Order of the Committee [20 June], (as amended [6July]), to put forthwith the Questions necessary to dispose of the business to be concluded at that time. Amendment negatived”.

Clause 138 disagreed to.

New clause 5

Statement of capital required where company already has share capital
‘(1) A company which on re-registration under section 107 already has allotted share capital must within 15 days after the re-registration deliver a statement of capital to the registrar.
(2) This does not apply if the information which would be included in the statement has already been sent to the registrar in—
(a) a statement of capital and initial shareholdings (see section 10), or
(b) a statement of capital contained in an annual return (see section 638(2)).
(3) The statement of capital must state with respect to the company’s share capital on re-registration—
(a) the total number of shares of the company,
(b) the aggregate nominal value of those shares,
(c) for each class of shares—
(i) prescribed particulars of the rights attached to the shares,
(ii) the total number of shares of that class, and
(iii) the aggregate nominal value of shares of that class, and
(d) the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium).
(4) If default is made in complying this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(5) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New clause 6

Overseas branch registers
‘(1) A company having a share capital may, if it transacts business in a country or territory to which this Chapter applies, cause to be kept there a branch register of members resident there (an “overseas branch register”).
(2) This Chapter applies to—
(a) any part of Her Majesty’s dominions outside the United Kingdom, the Channel Islands and the Isle of Man, and
(b) the countries or territories listed below.
Bangladesh
Malaysia
Cyprus
Malta
Dominica
Nigeria
The Gambia
Pakistan
Ghana
Seychelles
Guyana
Sierra Leone
The Hong Kong Special Administrative Region of the People’s Republic of China
Singapore
India
South Africa
Ireland
Sri Lanka
Kenya
Swaziland
Kiribati
Trinidad and Tobago
Lesotho
Uganda
Malawi
Zimbabwe
(3) The Secretary of State may make provision by regulations as to the circumstances in which a company is to be regarded as keeping a register in a particular country or territory.
(4) Regulations under this section are subject to negative resolution procedure.
(5) References—
(a) in any Act or instrument (including, in particular, a company’s articles) to a dominion register, or
(b) in articles registered before 1st November 1929 to a colonial register,
are to be read (unless the context otherwise requires) as a reference to an overseas branch register kept under this section.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New clause 7

Notice of opening of overseas branch register
‘(1) A company that begins to keep an overseas branch register must give notice to the registrar within 14 days of doing so, stating the country or territory in which the register is kept.
(2) If default is made in complying with subsection (1), an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(3) A person guilty of an offence under subsection (2) is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New clause 8

Keeping of overseas branch register
‘(1) An overseas branch register is regarded as part of the company’s register of members (“the main register”).
(2) The Secretary of State may make provision by regulations modifying any provision of Chapter 2 (register of members) as it applies in relation to an overseas branch register.
(3) Regulations under this section are subject to negative resolution procedure.
(4) Subject to the provisions of this Act, a company may by its articles make such provision as it thinks fit as to the keeping of overseas branch registers.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New clause 9

Register or duplicate to be kept available for inspection in UK
‘(1) A company that keeps an overseas branch register must keep available for inspection—
(a) the register, or
(b) a duplicate of the register duly entered up from time to time,
at the place in the United Kingdom where the company’s main register is kept available for inspection.
(2) Any such duplicate is treated for all purposes of this Act as part of the main register.
(3) If default is made in complying with subsection (1), an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(4) A person guilty of an offence under subsection (3) is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New clause 10

Transactions in shares registered in overseas branch register
‘(1) Shares registered in an overseas branch register must be distinguished from those registered in the main register.
(2) No transaction with respect to shares registered in an overseas branch register may be registered in any other register.
(3) An instrument of transfer of a share registered in an overseas branch register—
(a) is regarded as a transfer of property situated outside the United Kingdom, and
(b) unless executed in a part of the United Kingdom, is exempt from stamp duty.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New clause 11

Jurisdiction of local courts
‘(1) A competent court in a country or territory where an overseas branch register is kept may exercise the same jurisdiction as is exercisable by a court in the United Kingdom—
(a) to rectify the register (see section 124), or
(b) in relation to a request for inspection or a copy of the register (see section 116).
(2) The offences—
(a) of refusing inspection or failing to provide a copy of the register (see section 117), and
(b) of making a false, misleading or deceptive statement in a request for inspection or a copy (see section 118),
may be prosecuted summarily before any tribunal having summary criminal jurisdiction in the country or territory where the register is kept.
(3) This section extends only to those countries and territories to which paragraph 3 of Schedule 14 to the Companies Act 1985 (c. 6) (which made similar provision) extended immediately before the coming into force of this Chapter.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New clause 12

Discontinuance of overseas branch register
‘(1) A company may discontinue an overseas branch register.
(2) If it does so all the entries in that register must be transferred—
(a) to some other overseas branch register kept in the same country or territory, or
(b) to the main register.
(3) The company must give notice to the registrar within 14 days of the discontinuance.
(4) If default is made in complying with subsection (3), an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(5) A person guilty of an offence under subsection (4) is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New clause 13

UK branch registers of overseas companies
‘(1) This section applies where, by virtue of the law in force in a country or territory to which this section applies, companies incorporated under that law have power to keep in the United Kingdom branch registers of their members resident in the United Kingdom.
(2) Her Majesty may by Order in Council direct that—
(a) section 113 (register of members to be kept available for inspection),
(b) sections 115 to 119 (rights to inspect and request copies), and
(c) section 124 (power of court to rectify register),
apply to and in relation to such branch registers, subject to any modifications and adaptations specified in the Order, as they apply to and in relation to the registers of companies subject to those sections.
(3) The countries and territories to which this section applies are—
(a) the Channel Islands and the Isle of Man, and
(b) those listed below.
Bangladesh
Malta
Botswana
Nigeria
Cyprus
Pakistan
Dominica
Seychelles
The Gambia
Sierra Leone
Ghana
Singapore
Guyana
South Africa
The Hong Kong Special Administrative Region of the People’s Republic of China
Sri Lanka
India
Swaziland
Ireland
Tonga
Kenya
Trinidad and Tobago
Kiribati
Uganda
Lesotho
Zambia
Malawi
Zimbabwe
Malaysia’.

[Margaret Hodge.]

Brought up, and added to the Bill.

New clause 14

Authorised signatories
‘(1) The following are authorised signatories in relation to a company—
(a) every director of the company;
(b) in the case of a public company, the secretary (or any joint secretary) of the company;
(c) any person appointed as an authorised signatory under this Part.
(2) Every director, and every such secretary or person appointed as an authorised signatory, is by virtue of his appointment authorised to sign documents of any description on behalf of the company.
(3) The signature of any such person on behalf of the company is effective notwithstanding that it is afterwards discovered—
(a) that there was a defect in his appointment,
(b) that he was not qualified to be appointed, or
(c) that he had ceased to hold office.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New clause 15

Appointment of authorised signatories
‘(1) A company may appoint one or more authorised signatories.
(2) This is in addition to its directors and, in the case of a public company, its secretary (or joint secretaries).
(3) A person so appointed must be an individual.
(4) An appointment under this section must comply with section (Minimum age for appointment as authorised signatory) (minimum age for appointment as authorised signatory).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New clause 16

Minimum age for appointment as authorised signatory
‘(1) A person may not be appointed an authorised signatory under this Part unless he has attained the age of 16 years.
(2) This does not affect the validity of an appointment that is not to take effect until the person appointed attains that age.
(3) An appointment made in contravention of this section is void.
(4) Nothing in this section affects any liability of a person under any provision of the Companies Acts if he purports to act as an authorised signatory although he could not, by virtue of this section, be validly appointed as an authorised signatory.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New clause 17

Register of authorised signatories
‘(1) Every company that has appointed one or more persons as authorised signatories under this Part must keep a register of those persons.
(2) The register—
(a) must contain the required particulars (see sections (Particulars of authorised signatories to be registered) and (Particulars to be registered: power to make regulations)) of each person so appointed, and
(b) must be kept available for inspection at the company’s registered office.
(3) The register must contain, in a prominent position, a statement—
(a) that the company’s directors, and in the case of a public company its secretary (or any of its joint secretaries), are also authorised signatories in relation to the company, and
(b) that particulars of those persons may be found in the company’s register of directors or register of secretaries.
(4) The register must be open to the inspection—
(a) of any member of the company without charge, and
(b) of any other person on payment of such fee as may be prescribed.
(5) If default is made in complying with subsection (1), (2) or (3), or if an inspection required under subsection (4) is refused, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(6) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 5 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 5 on the standard scale.
(7) In the case of a refusal of inspection of the register, the court may by order compel an immediate inspection.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New clause 18

Particulars to be registered
‘(1) A company’s register of authorised signatories must contain the following particulars of each authorised signatory—
(a) name and any former name;
(b) address.
(2) For the purposes of this section “name” means a person’s Christian name (or other forename) and surname, except that in the case of—
(a) a peer, or
(b) an individual usually known by a title,
the title may be stated instead of his Christian name (or other forename) and surname or in addition to either or both of them.
(3) For the purposes of this section a “former name” means a name by which the individual was formerly known for business purposes.
Where a person is or was formerly known by more than one such name, each of them must be stated.
(4) It is not necessary for the register to contain particulars of a former name in the following cases—
(a) in the case of a peer or an individual normally known by a British title, where the name is one by which the person was known previous to the adoption of or succession to the title;
(b) in the case of any person, where the former name—
(i) was changed or disused before the person attained the age of 16 years, or
(ii) has been changed or disused for 20 years or more.
(5) The address required to be stated in the register is a service address.
This may be stated to be “The company’s registered office”.’—[Margaret Hodge.]

Brought up, and added to the Bill.

New clause 19

Particulars to be registered: power to make regulations
‘(1) The Secretary of State may make provision by regulations amending section (Particulars of authorised signatories to be registered) (particulars of authorised signatories to be registered) so as to add to or remove items from the particulars required to be contained in a company’s register of authorised signatories.
(2) Regulations under this section are subject to affirmative resolution procedure.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New clause 20

Duty to notify registrar of changes
‘(1) A company must, within the period of 14 days from the occurrence of—
(a) any change in the persons appointed as authorised signatories under this Part, or
(b) any change in the particulars contained in its register of authorised signatories,
give notice to the registrar of the change and of the date on which it occurred.
(2) Notice of a person having been appointed an authorised signatory of the company under this Part must be accompanied by a consent by that person to act in that capacity.
(3) If default is made in complying with this section, an offence is committed by every officer of the company who is in default.
For this purpose a shadow director is treated as an officer of the company.
(4) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 5 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 5 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New clause 28

Requirement of consent of Charity Commission: companies that are charities
‘For section 66 of the Charities Act 1993 (c. 10) substitute—
“66 Consent of Commission required for approval etc by members of charitable companies
(1) Where a company is a charity—
(a) any approval given by the members of the company under any provision of Chapter 4 of Part 10 of the Company Law Reform Act 2006 (transactions with directors requiring approval by members) listed in subsection (2) below, and
(b) any affirmation given by members of the company under section 182 or 198 of that Act (affirmation of unapproved property transactions and loans),
is ineffective without the prior written consent of the Commission.
(2) The provisions are—
(a) section 174 (directors’ long-term service contracts);
(b) section 176 (substantial property transactions with directors etc);
(c) section 183 (loans and quasi-loans to directors etc);
(d) section 185 (credit transactions for benefit of directors etc);
(e) section 187 (related arrangements);
(f) section 201 (payments to directors for loss of office);
(g) section 202 (payments to directors for loss of office: transfer of undertaking etc).
66A Consent of Commission required for certain acts of charitable company
(1) A company that is a charity may not do an act to which this section applies without the prior written consent of the Commission.
(2) This section applies to an act that—
(a) does not require approval under a listed provision of Chapter 4 of Part 10 of the Company Law Reform Act 2006 (transactions with directors) by the members of the company, but
(b) would require such approval but for an exemption in the provision in question that disapplies the need for approval on the part of the members of a body corporate which is a wholly-owned subsidiary of another body corporate.
(3) The reference to a listed provision is a reference to a provision listed in section 66(2) above.
(4) If a company acts in contravention of this section, the exemption referred to in subsection (2)(b) shall be treated as of no effect in relation to the act.”.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New clause 29

Qualifying pension scheme indemnity provision
‘(1) Section 216(2) (voidness of provisions for indemnifying directors) does not apply to qualifying pension scheme indemnity provision.
(2) Pension scheme indemnity provision means provision indemnifying a director of a company that is a trustee of an occupational pension scheme against liability incurred in connection with the company’s activities as trustee of the scheme.
Such provision is qualifying pension scheme indemnity provision if the following requirements are met.
(3) The provision must not provide any indemnity against—
(a) any liability of the director to pay—
(i) a fine imposed in criminal proceedings, or
(ii) a sum payable to a regulatory authority by way of a penalty in respect of non-compliance with any requirement of a regulatory nature (however arising); or
(b) any liability incurred by the director in defending criminal proceedings in which he is convicted.
(4) The reference in subsection (3)(b) to a conviction is to the final decision in the proceedings.
(5) For this purpose—
(a) a conviction becomes final—
(i) if not appealed against, at the end of the period for bringing an appeal, or
(ii) if appealed against, at the time when the appeal (or any further appeal) is disposed of; and
(b) an appeal is disposed of—
(i) if it is determined and the period for bringing any further appeal has ended, or
(ii) if it is abandoned or otherwise ceases to have effect.
(6) In this section “occupational pension scheme” means an occupational pension scheme as defined in section 150(5) of the Finance Act 2004 (c.12) that is established under a trust.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 36

Effect of provisions of articles as to enjoyment or exercise of members’ rights
‘(1) This section applies where provision is made by a company’s articles enabling a member to nominate another person or persons as entitled to enjoy or exercise all or any specified rights of the member in relation to the company.
(2) So far as is necessary to give effect to that provision, anything required or authorised by any provision of the Companies Acts to be done by or in relation to the member shall instead be done, or (as the case may be) may instead be done, by or in relation to the nominated person (or each of them) as if he were a member of the company.
(3) This applies, in particular, to the rights conferred by—
(a) sections 274 and 276 (right to be sent proposed written resolution);
(b) section 275 (right to require circulation of written resolution);
(c) section 286 (right to require directors to call general meeting);
(d) section 293 (right to notice of general meetings);
(e) section 297 (right to require circulation of a statement);
(f) section 307 (right to appoint proxy to act at meeting);
(g) section 321 (right to require circulation of resolution for AGM of public company); and
(h) section 405 (right to be sent a copy of annual accounts and reports).
(4) This section and any such provision as is mentioned in subsection (1)—
(a) do not confer rights enforceable against the company by anyone other than the member, and
(b) do not affect the requirements for an effective transfer or other disposition of the whole or part of a member’s interest in the company.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 37

Traded companies: nomination of person to enjoy information rights
‘(1) This section applies to a company whose shares are admitted to trading on a regulated market.
(2) A member of such a company who holds shares on behalf of another person may nominate that person to enjoy information rights.
(3) “Information rights” means—
(a) the right to receive a copy of all communications that the company sends to its members generally or to any class of its members that includes the person making the nomination, and
(b) the rights conferred by—
(i) section 415 or 416 (right to require copies of accounts and reports), and
(ii) section 797 (right to require hard copy version of document or information provided in another form).
(4) A company need not act on a nomination purporting to relate to certain information rights only.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 38

Information rights: form in which copies to be provided
‘(1) This section applies as regards the form in which copies are to be provided to a person nominated under section (Traded companies: nomination of person to enjoy information rights) (nomination of person to enjoy information rights).
(2) If the person to be nominated wishes to receive hard copy communications, he must—
(a) request the person making the nomination to notify the company of that fact, and
(b) provide an address to which such copies may be sent.
This must be done before the nomination is made.
(3) If having received such a request the person making the nomination—
(a) notifies the company that the nominated person wishes to receive hard copy communications, and
(b) provides the company with that address,
the right of the nominated person is to receive hard copy communications accordingly.
(4) This is subject to the provisions of Parts 3 and 4 of Schedule 7 (communications by traded company) under which the company may take steps to enable it to communicate in electronic form or by means of a website.
(5) If no such notification is given (or no address is provided), the nominated person is taken to have agreed that documents or information may be sent or supplied to him by the company by means of a website.
(6) That agreement—
(a) may be revoked by the nominated person, and
(b) does not affect his right under section 797 to require a hard copy version of a document or information provided in any other form.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 39

Termination or suspension of nomination
‘(1) The following provisions have effect in relation to a nomination under section (Traded companies: nomination of person to enjoy information rights) (nomination of person to enjoy information rights).
(2) The nomination may be terminated at the request of the member or of the nominated person.
(3) The nomination ceases to have effect on the occurrence in relation of the member or the nominated person of any of the following—
(a) in the case of an individual, death or bankruptcy;
(b) in the case of a body corporate, dissolution or the making of an order for the winding up of the body otherwise than for the purposes of reconstruction.
(4) In subsection (3)—
(a) the reference to bankruptcy includes—
(i) the sequestration of a person’s estate, and
(ii) a person’s estate being the subject of a protected trust deed (within the meaning of the Bankruptcy (Scotland) Act 1985 (c. 66)); and
(b) the reference to the making of an order for winding up is to—
(i) the making of such an order under the Insolvency Act 1986 (c.45) or the Insolvency (Northern Ireland) Order 1989 (S.I.1989/2405(N.I.19)), or
(ii) any corresponding proceeding under the law of a country or territory outside the United Kingdom.
(5) The effect of any nominations made by a member is suspended at any time when there are more nominated persons than the member has shares in the company.
(6) Where—
(a) the member holds different classes of shares with different information rights, and
(b) there are more nominated persons than he has shares conferring a particular right,
the effect of any nominations made by him is suspended to the extent that they confer that right.
(7) Where the company—
(a) enquires of a nominated person whether he wishes to retain information rights, and
(b) does not receive a response within the period of 28 days beginning with the date on which the company’s enquiry was sent,
the nomination ceases to have effect at the end of that period.
Such an enquiry is not to be made of a person more than once in any twelve- month period.
(8) The termination or suspension of a nomination means that the company is not required to act on it.
It does not prevent the company from continuing to do so, to such extent or for such period as it thinks fit.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 40

Information as to possible rights in relation to voting
‘(1) This section applies where a company sends a copy of a notice of a meeting to a person nominated under section (Traded companies: nomination of person to enjoy information rights) (nomination of person to enjoy information rights)
(2) The copy of the notice must be accompanied by a statement that—
(a) he may have a right under an agreement between him and the member by whom he was nominated to be appointed, or to have someone else appointed, as a proxy for the meeting, or
(b) if he has no such right or does not wish to exercise it, he may have a right under such an agreement to give instructions to the member as to the exercise of voting rights.
(3) Section 308 (notice of meeting to contain statement of member’s rights in relation to appointment of proxy) does not apply to the copy, and the company must either—
(a) omit the notice required by that section, or
(b) include it but state that it does not apply to the nominated person.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 41

Information rights: status of rights
‘(1) This section has effect as regards the rights conferred by a nomination under section (Traded companies: nomination of person to enjoy information rights) (nomination of person to enjoy information rights).
(2) Enjoyment by the nominated person of the rights conferred by the nomination is enforceable against the company by the member as if they were rights conferred by the company’s articles.
(3) Any enactment, and any provision of the company’s articles, having effect in relation to communications with members has a corresponding effect (subject to any necessary adaptations) in relation to communications with the nominated person.
(4) In particular—
(a) where under any enactment, or any provision of the company’s articles, the members of a company entitled to receive a document or information are determined as at a date or time before it is sent or supplied, the company need not send or supply it to a nominated person—
(i) whose nomination was received by the company after that date or time, or
(ii) if that date or time falls in a period of suspension of his nomination; and
(b) where under any enactment, or any provision of the company’s articles, the right of a member to receive a document or information depends on the company having a current address for him, the same applies to any person nominated by him.
(5) The rights conferred by the nomination—
(a) are in addition to the rights of the member himself, and
(b) do not affect any rights exercisable by virtue of any such provision as is mentioned in section (Effect of provisions of articles as to enjoyment or exercise of members’ rights) (provisions of company’s articles as to enjoyment or exercise of members’ rights).
(6) A failure to give effect to the rights conferred by the nomination does not affect the validity of anything done by or on behalf of the company.
(7) References in this section to the rights conferred by the nomination are to—
(a) the rights referred to in section (Traded companies: nomination of person to enjoy information rights)(3) (information rights), and
(b) where applicable, the rights conferred by section (Information rights: form in which copies to be provided)(3) (right to hard copy communications) and section (Information as to possible rights in relation to voting) (information as to possible voting rights).’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 42

Information rights: power to amend
‘(1) The Secretary of State may by regulations amend the provisions of sections (Traded companies: nomination of persons to enjoy information rights) to (Information rights: status of rights) (information rights) so as to—
(a) extend or restrict the classes of companies to which section (Traded companies: nomination of persons to enjoy information rights) applies,
(b) make other provision as to the circumstances in which a nomination may be made under that section, or
(c) extend or restrict the rights conferred by such a nomination.
(2) The regulations may make such consequential modifications of any other provisions of this Part, or of any other enactment, as appear to the Secretary of State to be necessary.
(3) Regulations under this section are subject to affirmative resolution procedure.’—[Margaret Hodge.]

Brought up, read the First and Second time and added to the Bill..

New Clause 43

Exercise of rights where shares held on behalf of others: exercise in different ways
‘(1) Where a person holds shares in a company on behalf of more than one person—
(a) rights attached to the shares, and
(b) rights under any enactment exercisable by the person holding the shares,
need not all be exercised, and if exercised, need not all be exercised in the same way.
(2) A member who exercises such rights but does not exercise all his rights, must inform the company to what extent he is exercising the rights.
(3) A member who exercises such rights in different ways must inform the company of the ways in which he is exercising them and to what extent they are exercised in each way.
(4) If a member exercises such rights without informing the company—
(a) that he is not exercising all his rights, or
(b) that he is exercising his rights in different ways,
the company is entitled to assume that he is exercising all his rights and is exercising them in the same way.’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 44

Exercise of rights where shares held on behalf of others: members’ requests
‘(1) This section applies for the purposes of—
(a) section 297 (power to require circulation of statement),
(b) section 321 (public companies: power to require circulation of resolution for AGM),
(c) section 325 (power to require independent report on poll), and
(d) section 517 (power to require website publication of audit concerns).
(2) A company is required to act under any of those sections if it receives a request in relation to which the following conditions are met—
(a) it is made by at least 100 persons;
(b) it is authenticated by all the persons making it;
(c) in the case of any of those persons who is not a member of the company, it is accompanied by a statement—
(i) of the full name and address of a person (“the member”) who is a member of the company and holds shares on behalf of that person,
(ii) that the member is holding those shares on behalf of that person in the course of a business,
(iii) of the number of shares in the company that the member holds on behalf of that person,
(iv) of the total amount paid up on those shares,
(v) that those shares are not held on behalf of anyone else or, if they are, that the other person or persons are not among the other persons making the request,
(vi) that some or all of those shares confer voting rights that are relevant for the purposes of making a request under the section in question, and
(vii) that the person has the right to instruct the member how to exercise those rights;
(d) in the case of any of those persons who is a member of the company, it is accompanied by a statement—
(i) that he holds shares otherwise than on behalf of another person, or
(ii) that he holds shares on behalf of one or more other persons but those persons are not among the other persons making the request;
(e) it is accompanied by such evidence as the company may reasonably require of the matters mentioned in paragraph (c) and (d);
(f) the total amount of the sums paid up on—
(i) shares held as mentioned in paragraph (c), and
(ii) shares held as mentioned in paragraph (d),
divided by the number of persons making the request, is not less than £100;
(g) the request complies with any other requirements of the section in question as to contents, timing and otherwise.’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 45

Shares
‘(1) In the Companies Acts “share”, in relation to a company, means share in the company’s share capital.
(2) A company’s shares may no longer be converted into stock.
(3) Stock created before the commencement of this Part may be reconverted into shares in accordance with section (Re-conversion of stock into shares).
(4) In the Companies Acts—
(a) references to shares include stock except where a distinction between share and stock is express or implied, and
(b) references to a number of shares include an amount of stock where the context admits of the reference to shares being read as including stock.’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 46

Nature of shares
The shares or other interest of a member in a company are personal property (or, in Scotland, moveable property) and are not in the nature of real estate (or heritage).’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 47

Nominal value of shares
‘(1) Shares in a limited company having a share capital must each have a fixed nominal value.
(2) An allotment of a share that does not have a fixed nominal value is void.
(3) Shares in a limited company having a share capital may be denominated in any currency, and different classes of shares may be denominated in different currencies.
(4) If a company purports to allot shares in contravention of this section, an offence is committed by every officer of the company who is in default.
(5) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine, and
(b) on summary conviction, to a fine not exceeding the statutory maximum.’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 48

Numbering of shares
‘(1) Each share in a company having a share capital must be distinguished by its appropriate number, except in the following circumstances.
(2) If at any time—
(a) all the issued shares in a company are fully paid up and rank pari passu for all purposes, or
(b) all the issued shares of a particular class in a company are fully paid up and rank pari passu for all purposes,
none of those shares need thereafter have a distinguishing number so long as it remains fully paid up and ranks pari passu for all purposes with all shares of the same class for the time being issued and fully paid up.’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 49

Transferability of shares
‘(1) The shares or other interest of any member in a company are transferable in accordance with the company’s articles.
(2) This is subject to—
(a) the Stock Transfer Act 1963 (c. 18) or the Stock Transfer Act (Northern Ireland) 1963 (c.24(N.I.)) (which enables securities of certain descriptions to be transferred by a simplified process), and
(b) regulations under Chapter (Evidencing and transferring title to securities without written instrument) of Part (Certification and transfer of securities) of this Act (which enable title to securities to be evidenced and transferred without a written instrument).
(3) See Part 21 of this Act generally as regards share transfers.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 50

Companies having a share capital
References in the Companies Acts to a company having a share capital are to a company that has power under its constitution to issue shares.’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 51

Issued and allotted share capital
‘(1) References in the Companies Acts—
(a) to “issued share capital” are to shares of a company that have been issued;
(b) to “allotted share capital” are to shares of a company that have been allotted.
(2) References in the Companies Acts to issued or allotted shares, or to issued or allotted share capital, include shares taken on the formation of the company by the subscribers to the company’s memorandum.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 52

Called-up share capital
In the Companies Acts—
“called-up share capital”, in relation to a company, means so much of its share capital as equals the aggregate amount of the calls made on its shares (whether or not those calls have been paid), together with—
(a) any share capital paid up without being called, and
(b) any share capital to be paid on a specified future date under the articles, the terms of allotment of the relevant shares or any other arrangements for payment of those shares; and
“uncalled share capital” is to be construed accordingly.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 53

Equity share capital
In the Companies Acts “equity share capital”, in relation to a company, means its issued share capital excluding any part of that capital that does not carry any right (either as respects dividends or as respects capital) to participate beyond a specified amount in a distribution.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 54

Exercise by directors of power to allot shares etc
‘(1) The directors of a company must not exercise any power of the company—
(a) to allot shares in the company, or
(b) to grant rights to subscribe for, or to convert any security into, shares in the company,
except in accordance with section (Power of directors to allot shares etc: private company with only one class of shares) (private company with single class of shares) or section (Power of directors to allot shares etc: authorisation by company) (authorisation by company).
(2) Subsection (1) does not apply—
(a) to the allotment of shares in pursuance of an employees’ share scheme, or
(b) to the grant of a right to subscribe for, or to convert any security into, shares so allotted.
(3) If this section applies in relation to the grant of a right to subscribe for, or to convert any security into, shares, it does not apply in relation to the allotment of shares pursuant to that right.
(4) A director who knowingly contravenes, or permits or authorises a contravention of, this section commits an offence.
(5) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.
(6) Nothing in this section affects the validity of an allotment or other transaction.’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 55

Power of directors to allot shares etc: private company with only one class of shares
Where a private company has only one class of shares, the directors may exercise any power of the company—
(a) to allot shares of that class, or
(b) to grant rights to subscribe for or to convert any security into such shares,
except to the extent that they are prohibited from doing so by the company’s articles.’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 56

Power of directors to allot shares etc: authorisation by company
‘(1) The directors of a company may exercise a power of the company—
(a) to allot shares in the company, or
(b) to grant rights to subscribe for or to convert any security into shares in the company,
if they are authorised to do so by the company’s articles or by resolution of the company.
(2) Authorisation may be given for a particular exercise of the power or for its exercise generally, and may be unconditional or subject to conditions.
(3) Authorisation must—
(a) state the maximum amount of shares that may be allotted under it, and
(b) specify the date on which it will expire, which must be not more than five years from—
(i) in the case of authorisation contained in the company’s articles at the time of its original incorporation, the date of that incorporation;
(ii) in any other case, the date on which the resolution is passed by virtue of which the authorisation is given.
(4) Authorisation may—
(a) be renewed or further renewed by resolution of the company for a further period not exceeding five years, and
(b) be revoked or varied at any time by resolution of the company.
(5) A resolution renewing authorisation must—
(a) state (or restate) the maximum amount of shares that may be allotted under the authorisation or, as the case may be, the amount remaining to be allotted under it, and
(b) specify the date on which the renewed authorisation will expire.
(6) In relation to rights to subscribe for or to convert any security into shares in the company, references in this section to the maximum amount of shares that may be allotted under the authorisation are to the maximum amount of shares that may be allotted pursuant to the rights.
(7) The directors may allot shares, or grant rights to subscribe for or to convert any security into shares, after authorisation has expired if—
(a) the shares are allotted, or the rights are granted, in pursuance of an offer or agreement made by the company before the authorisation expired, and
(b) the authorisation allowed the company to make an offer or agreement which would or might require shares to be allotted, or rights to be granted, after the authorisation had expired.
(8) A resolution of a company to give, vary, revoke or renew authorisation under this section may be an ordinary resolution, even though it amends the company’s articles.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 57

General prohibition of commissions, discounts and allowances
‘(1) Except as permitted by section (permitted commission) (permitted commission), a company must not apply any of its shares or capital money, either directly or indirectly, in payment of any commission, discount or allowance to any person in consideration of his—
(a) subscribing or agreeing to subscribe (whether absolutely or conditionally) for shares in the company, or
(b) procuring or agreeing to procure subscriptions (whether absolute or conditional) for shares in the company.
(2) It is immaterial how the shares or money are so applied, whether by being added to the purchase money of property acquired by the company or to the contract price of work to be executed for the company, or being paid out of the nominal purchase money or contract price, or otherwise.
(3) Nothing in this section affects the payment of such brokerage as has previously been lawful.’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 58

Permitted commission
‘(1) A company may, if the following conditions are satisfied, pay a commission to a person in consideration of his subscribing or agreeing to subscribe (whether absolutely or conditionally) for shares in the company, or procuring or agreeing to procure subscriptions (whether absolute or conditional) for shares in the company,
(2) The conditions are—
(a) the payment of the commission is authorised by the company’s articles;
(b) the commission paid or agreed to be paid does not exceed—
(i) 10% of the price at which the shares are issued, or
(ii) the amount or rate authorised by the articles,
whichever is the less.
(3) A vendor to, or promoter of, or other person who receives payment in money or shares from, a company may apply any part of the money or shares so received in payment of any commission the payment of which directly by the company would be permitted by this section.’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 59

Registration of allotment
‘(1) A company must register an allotment of shares as soon as practicable and in any event within two months after the date of the allotment.
(2) This does not apply if the company has issued a share warrant in respect of the shares (see section (Issue and effect of share warrant to bearer).
(3) If a company fails to comply with this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(4) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 2 on the standard scale.
(5) For the company’s duties as to the issue of share certificates etc, see Part 21 (certification and transfer of securities)’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 60

Return of allotment by limited company
‘(1) This section applies to a company limited by shares and to a company limited by guarantee and having a share capital.
(2) The company must, within one month of making an allotment of shares, deliver to the registrar for registration a return of the allotment.
(3) The return must—
(a) contain the prescribed information, and
(b) be accompanied by a statement of capital.
(4) The statement of capital must state with respect to the company’s share capital at the date to which the return is made up—
(a) the total number of shares of the company,
(b) the aggregate nominal value of those shares,
(c) for each class of shares—
(i) prescribed particulars of the rights attached to the shares,
(ii) the total number of shares of that class, and
(iii) the aggregate nominal value of shares of that class, and
(d) the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium).’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 61

Return of allotment by unlimited company allotting new class of shares
‘(1) This section applies to an unlimited company that allots shares of a class with rights that are not in all respects uniform with shares previously allotted.
(2) The company must, within one month of making such an allotment, deliver to the registrar for registration a return of the allotment.
(3) The return must contain the prescribed particulars of the rights attached to the shares.
(4) For the purposes of this section shares are not to be treated as different from shares previously allotted by reason only that the former do not carry the same rights to dividends as the latter during the twelve months immediately following the former’s allotment.’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 62

Offence of failure to make return
‘(1) If a company makes default in complying with—
section (return of allotment by limited company) (return of allotment of shares by limited company), or
section (return of allotment by unlimited company of new class of shares) (return of allotment of new class of shares by unlimited company),
an offence is committed by every officer of the company who is in default.
(2) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum and, for continued contravention, a daily default fine not exceeding one-tenth of the statutory maximum.
(3) In the case of default in delivering to the registrar within one month after the allotment the return required by section (return of allotment of shares by limited company) or (return of allotment of new class of shares by unlimited company)—
(a) any person liable for the default may apply to the court for relief, and
(b) the court, if satisfied—
(i) that the omission to deliver the document was accidental or due to inadvertence, or
(ii) that it is just and equitable to grant relief,
may make an order extending the time for delivery of the document for such period as the court thinks proper.’—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 63

When shares are allotted
‘For the purposes of the Companies Acts shares in a company are taken to be allotted when a person acquires the unconditional right to be included in the company’s register of members in respect of the shares.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 64

Provisions about allotment not applicable to shares taken on formation
‘The provisions of this Chapter have no application in relation to the taking of shares by the subscribers to the memorandum on the formation of the company.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 65

Meaning of “equity securities” and related expressions
‘(1) In this Chapter—
“equity securities” means—
(c) ordinary shares in the company, or
(d) rights to subscribe for, or to convert securities into, ordinary shares in the company;
“ordinary shares” means shares other than shares that as respects dividends and capital carry a right to participate only up to a specified amount in a distribution.
(2) References in this Chapter to the allotment of equity securities include—
(a) the grant of a right to subscribe for, or to convert any securities into, ordinary shares in the company, and
(b) the sale of ordinary shares in the company that immediately before the sale are held by the company as treasury shares.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 66

Existing shareholders’ right of pre-emption
‘(1) A company must not allot equity securities to a person on any terms unless—
(a) it has made an offer to each person who holds ordinary shares in the company to allot to him on the same or more favourable terms a proportion of those securities that is as nearly as practicable equal to the proportion in nominal value held by him of the ordinary share capital of the company, and
(b) the period during which any such offer may be accepted has expired or the company has received notice of the acceptance or refusal of every offer so made.
(2) Securities that a company has offered to allot to a holder of ordinary shares may be allotted to him, or anyone in whose favour he has renounced his right to their allotment, without contravening subsection (1)(b).
(3) If subsection (1) applies in relation to the grant of such a right, it does not apply in relation to the allotment of shares in pursuance of that right.
(4) Shares held by the company as treasury shares are disregarded for the purposes of this section, so that—
(a) the company is not treated as a person who holds ordinary shares, and
(b) the shares are not treated as forming part of the ordinary share capital of the company.
(5) This section is subject to—
(a) sections (Exception to pre-emption right: bonus shares) to (Exception to pre-emption right: securities held under employees’ share scheme) (exceptions to pre-emption right),
(b) sections (Exclusion of requirements by private companies) and (Exclusion of pre-emption right: articles conferring corresponding right) (exclusion of rights of pre-emption),
(c) sections (Disapplication of pre-emption rights: private company with only one class of shares) to (Disapplication of pre-emption rights: sale of treasury shares) (disapplication of pre-emption rights), and
(d) section (Saving for certain older pre-emption requirements) (saving for certain older pre-emption procedures).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 67

Communication of pre-emption offers to shareholders
‘(1) This section has effect as to the manner in which offers required by section (Existing shareholders’ right of pre-emption) are to be made to holders of a company’s shares.
(2) The offer may be made in hard copy or electronic form.
(3) If the holder is the holder of a share warrant, the offer may be made by causing it, or a notice specifying where a copy of it can be obtained or inspected, to be published in the Gazette.
(4) The offer must state a period of not less than 21 days during which it may be accepted and the offer shall not be withdrawn before the end of that period.
(5) The Secretary of State may by regulations made by statutory instrument—
(a) reduce the period specified in subsection (4) (but not to less than 14 days), or
(b) increase that period.
(6) A statutory instrument containing regulations made under subsection (5) is subject to affirmative resolution procedure.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 68

Liability of company and officers in case of contravention
‘(1) This section applies where there is a contravention of—
section (Existing shareholders’ right of pre-emption) (existing shareholders’ right of pre-emption), or
section (Communication of pre-emption offers to shareholders) (communication of pre-emption offers to shareholders).
(2) The company and every officer of it who knowingly authorised or permitted the contravention are jointly and severally liable to compensate any person to whom an offer should have been made in accordance with those provisions for any loss, damage, costs or expenses which the person has sustained or incurred by reason of the contravention.
(3) No proceedings to recover any such loss, damage, costs or expenses shall be commenced after the expiration of two years—
(a) from the delivery to the registrar of companies of the return of allotment in question, or
(b) where equity securities other than shares are granted, from the date of the grant.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 69

Exception to pre-emption right: bonus shares
‘Section (Existing shareholders’ right of pre-emption)(1) (existing shareholders’ right of pre-emption) does not apply in relation to—
(a) the allotment of bonus shares, or
(b) the grant of a right to subscribe for, or to convert securities into, bonus shares.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 70

Exception to pre-emption right: issue for non-cash consideration
‘Section (Existing shareholders’ right of pre-emption)(1) (existing shareholders’ right of pre-emption) does not apply to a particular allotment of equity securities if these are, or are to be, wholly or partly paid up otherwise than in cash.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 71

Exception to pre-emption right: securities held under employees’ share scheme
‘Section (Existing shareholders’ right of pre-emption) (existing shareholders’ right of pre-emption) does not apply to the allotment of securities that would, apart from any renunciation or assignment of the right to their allotment, be held under an employees’ share scheme.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 72

Exclusion of requirements by private companies
‘(1) All or any of the requirements of—
(a) section (Existing shareholders’ right of pre-emption) (existing shareholders’ right of pre-emption), or
(b) section (Communication of pre-emption offers to shareholders) (communication of pre-emption offers to shareholders),
may be excluded by provision contained in the articles of a private company.
(2) They may be excluded—
(a) generally in relation to the allotment by the company of equity securities, or
(b) in relation to allotments of a particular description.
(3) Any requirement or authorisation contained in the articles of a private company that is inconsistent with either of those sections is treated for the purposes of this section as a provision excluding that section.
(4) A provision to which section (Exclusion of pre-emption right: articles conferring corresponding right) applies (exclusion of pre-emption right: corresponding right conferred by articles) is not to be treated as inconsistent with section (Existing shareholders’ right of pre-emption).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 73

Exclusion of pre-emption right: articles conferring corresponding right
‘(1) The provisions of this section apply where, in a case in which section (Existing shareholders’ right of pre-emption) (existing shareholders’ right of pre-emption) would otherwise apply—
(a) a company’s articles contain provision (“pre-emption provision”) prohibiting the company from allotting ordinary shares of a particular class unless it has complied with the condition that it makes such an offer as is described in section (Existing shareholders’ right of pre-emption)(1) to each person who holds ordinary shares of that class, and
(b) in accordance with that provision—
(i) the company makes an offer to allot shares to such a holder, and
(ii) he or anyone in whose favour he has renounced his right to their allotment accepts the offer.
(2) In that case, section (Existing shareholders’ right of pre-emption) does not apply to the allotment of those shares and the company may allot them accordingly.
(3) The provisions of section (Communication of pre-emption offers to shareholders) (communication of pre-emption offers to shareholders) apply in relation to offers made in pursuance of the pre-emption provision of the company’s articles.
This is subject to section (Exclusion of requirements by private companies) (exclusion of requirements by private companies).
(4) If there is contravention of the pre-emption provision of the company’s articles, the company, and every officer of it who knowingly authorised or permitted the contravention, are jointly and severally liable to compensate any person to whom an offer should have been made under the provision for any loss, damage, costs or expenses which the person has sustained or incurred by reason of the contravention.
(5) No proceedings to recover any such loss, damage, costs or expenses shall be commenced after the expiration of two years—
(a) from the delivery to the registrar of companies of the return of allotment, or
(b) where equity securities other than shares are granted, from the date of the grant.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 74

Disapplication of pre-emption rights: private company with only one class of shares
‘(1) The directors of a private company that has only one class of shares may be given power by the articles, or by a special resolution of the company, to allot equity securities of that class as if section (Existing shareholders’ right of pre-emption) (existing shareholders’ right of pre-emption)—
(a) did not apply to the allotment, or
(b) applied to the allotment with such modifications as the directors may determine.
(2) Where the directors make an allotment under this section, the provisions of this Chapter have effect accordingly.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 75

Disapplication of pre-emption rights: directors acting under general authorisation
‘(1) Where the directors of a company are generally authorised for the purposes of section (Power of directors to allot shares etc: authorisation by company) (power of directors to allot shares etc: authorisation by company), they may be given power by the articles, or by a special resolution of the company, to allot equity securities pursuant to that authorisation as if section (Existing shareholders’ right of pre-emption) (existing shareholders’ right of pre-emption)—
(a) did not apply to the allotment, or
(b) applied to the allotment with such modifications as the directors may determine.
(2) Where the directors make an allotment under this section, the provisions of this Chapter have effect accordingly.
(3) The power conferred by this section ceases to have effect when the authorisation to which it relates—
(a) is revoked or
(b) would (if not renewed) expire.
But if the authorisation is renewed the power may also be renewed, for a period not longer than that for which the authorisation is renewed, by a special resolution of the company.
(4) Notwithstanding that the power conferred by this section has expired, the directors may allot equity securities in pursuance of an offer or agreement previously made by the company if the power enabled the company to make an offer or agreement that would or might require equity securities to be allotted after it expired.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 76

Disapplication of pre-emption rights by special resolution
‘(1) Where the directors of a company are authorised for the purposes of section (Power of directors to allot shares etc: authorisation by company) (power of directors to allot shares etc: authorisation by company), whether generally or otherwise, the company may by special resolution resolve that section (Existing shareholders’ right of pre-emption) (existing shareholders’ right of pre-emption)—
(a) does not apply to a specified allotment of equity securities to be made pursuant to that authorisation, or
(b) applies to the allotment with such modifications as may be specified in the resolution.
(2) Where such a resolution is passed the provisions of this Chapter have effect accordingly.
(3) A special resolution under this section ceases to have effect when the authorisation to which it relates—
(a) is revoked or
(b) would (if not renewed) expire.
But if the authorisation is renewed the resolution may also be renewed, for a period not longer than that for which the authorisation is renewed, by a special resolution of the company.
(4) Notwithstanding that any such resolution has expired, the directors may allot equity securities in pursuance of an offer or agreement previously made by the company if the resolution enabled the company to make an offer or agreement that would or might require equity securities to be allotted after it expired.
(5) A special resolution under this section, or a special resolution to renew such a resolution, must not be proposed unless—
(a) it is recommended by the directors, and
(b) the directors have complied with the following provisions.
(6) Before such a resolution is proposed, the directors must make a written statement setting out—
(a) their reasons for making the recommendation,
(b) the amount to be paid to the company in respect of the equity securities to be allotted, and
(c) the directors’ justification of that amount.
(7) The directors’ statement must—
(a) if the resolution is proposed as a written resolution, be sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him;
(b) if the resolution is proposed at a general meeting, be circulated to the members entitled to notice of the meeting with that notice.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 77

Liability for false statement in directors’ statement
‘(1) This section applies in relation to a directors’ statement under section (Disapplication of pre-emption rights by special resolution) (special resolution disapplying pre-emption rights) that is sent, submitted or circulated under subsection (7) of that section.
(2) A person who knowingly or recklessly authorises or permits the inclusion of any matter that is misleading, false or deceptive in a material particular in such a statement commits an offence.
(3) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both);
(b) on summary conviction—
(i) in England and Wales, to imprisonment for a term not exceeding twelve months or to a fine not exceeding the statutory maximum (or both);
(ii) in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months, or to a fine not exceeding the statutory maximum (or both).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 78

Disapplication of pre-emption rights: sale of treasury shares
‘(1) This section applies in relation to a sale of shares that is an allotment of equity securities by virtue of section (Meaning of “equity securities” and related expressions)(2)(b) (sale of shares held by company as treasury shares).
(2) The directors of a company may be given power by the articles, or by a special resolution of the company, to allot equity securities as if section (Existing shareholders’ right of pre-emption) (existing shareholders’ right of pre-emption)—
(a) did not apply to the allotment, or
(b) applied to the allotment with such modifications as the directors may determine.
(3) The provisions of section (Disapplication of pre-emption rights: directors acting under general authorisation)(2) and (4) apply in that case as they apply to a case within subsection (1) of that section.
(4) The company may by special resolution resolve that section (Existing shareholders’ right of pre-emption)—
(a) shall not apply to a specified allotment of securities, or
(b) shall apply to the allotment with such modifications as may be specified in the resolution.
(5) The provisions of section (Disapplication of pre-emption rights by special resolution)(2) and (4) to (7) apply in that case as they apply to a case within subsection (1) of that section.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 79

References to holder of shares in relation to offer
‘(1) In this Chapter, in relation to an offer to allot securities required by—
(a) section (Existing shareholders’ right of pre-emption) (existing shareholders’ right of pre-emption), or
(b) any provision to which section (Exclusion of pre-emption right: articles conferring corresponding right) applies (articles conferring corresponding right),
a reference (however expressed) to the holder of shares of any description is to whoever was the holder of shares of that description at the close of business on a date to be specified in the offer.
(2) The specified date must fall within the period of 28 days immediately before the date of the offer.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 80

Saving for other restrictions on offer or allotment
‘(1) The provisions of this Chapter are without prejudice to any other enactment by virtue of which a company is prohibited (whether generally or in specified circumstances) from offering or allotting equity securities to any person.
(2) Where a company cannot by virtue of such an enactment offer or allot equity securities to a holder of ordinary shares of the company, those shares are disregarded for the purposes of section (Existing shareholders’ right of pre-emption) (existing shareholders’ right of pre-emption), so that—
(a) the person is not treated as a person who holds ordinary shares, and
(b) the shares are not treated as forming part of the ordinary share capital of the company.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 81

Saving for certain older pre-emption requirements
‘(1) In the case of a public company the provisions of this Chapter do not apply to an allotment of equity securities that are subject to a pre-emption requirement in relation to which section 96(1) of the Companies Act 1985 (c. 6) or Article 106(1) of the Companies (Northern Ireland) Order 1986 applied immediately before the commencement of this Chapter.
(2) In the case of a private company a pre-emption requirement to which section 96(3) of the Companies Act 1985 (c.6) or Article 106(3) of the Companies (Northern Ireland) Order 1986, Order applied immediately before the commencement of this Chapter shall have effect, so long as the company remains a private company, as if it were contained in the company’s articles.
(3) A pre-emption requirement to which section 96(4) of the Companies Act 1985 (c.6) or Article 106(4) of the Companies (Northern Ireland) Order 1986 applied immediately before the commencement of this section shall be treated for the purposes of this Chapter above as if it were contained in the company’s articles.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 82

Provisions about pre-emption not applicable to shares taken on formation
‘The provisions of this Chapter have no application in relation to the taking of shares by the subscribers to the memorandum on the formation of the company.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 83

Public companies: allotment where issue not fully subscribed
‘(1) No allotment shall be made of shares of a public company offered for subscription unless—
(a) the issue is subscribed for in full, or
(b) the offer is made on terms that the shares subscribed for may be allotted—
(i) in any event, or
(ii) if specified conditions are met (and those conditions are met).
(2) If shares are prohibited from being allotted by subsection (1) and 40 days have elapsed after the first making of the offer, all money received from applicants for shares must be repaid to them forthwith, without interest.
(3) If any of the money is not repaid within 48 days after the first making of the offer, the directors of the company are jointly and severally liable to repay it, with interest at the rate for the time being specified under section 17 of the Judgments Act 1838 (c. 110) from the expiration of the 48th day.
A director is not so liable if he proves that the default in the repayment of the money was not due to any misconduct or negligence on his part.
(4) This section applies in the case of shares offered as wholly or partly payable otherwise than in cash as it applies in the case of shares offered for subscription.
(5) In that case—
(a) the references in subsection (1) to subscription shall be construed accordingly;
(b) references in subsections (2) and (3) to the repayment of money received from applicants for shares include—
(i) the return of any other consideration so received (including, if the case so requires, the release of the applicant from any undertaking), or
(ii) if it is not reasonably practicable to return the consideration, the payment of money equal to its value at the time it was so received;
(c) references to interest apply accordingly.
(6) Any condition requiring or binding an applicant for shares to waive compliance with any requirement of this section is void.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 84

Public companies: effect of irregular allotment where issue not fully subscribed
‘(1) An allotment made by a public company to an applicant in contravention of section (Public companies: allotment where issue not fully subscribed) (public companies: allotment where issue not fully subscribed) is voidable at the instance of the applicant within one month after the date of the allotment, and not later.
(2) It is so voidable even if the company is in the course of being wound up.
(3) A director of a public company who knowingly contravenes, or permits or authorises the contravention of, any provision of section (Public companies: allotment where issue not fully subscribed) with respect to allotment is liable to compensate the company and the allottee respectively for any loss, damages, costs or expenses that the company or allottee may have sustained or incurred by the contravention.
(4) Proceedings to recover any such loss, damages, costs or expenses may not be brought more than two years after the date of the allotment.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 85

Shares not to be allotted at a discount
‘(1) A company’s shares must not be allotted at a discount.
(2) If shares are allotted in contravention of this section, the allottee is liable to pay the company an amount equal to the amount of the discount, with interest at the appropriate rate.’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 86

Provision for different amounts to be paid on shares
A company, if so authorised by its articles, may—
(a) make arrangements on the issue of shares for a difference between the shareholders in the amounts and times of payment of calls on their shares;
(b) accept from any member the whole or part of the amount remaining unpaid on any shares held by him, although no part of that amount has been called up;
(c) pay dividend in proportion to the amount paid up on each share where a larger amount is paid up on some shares than on others.’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 87

General rule as to means of payment
‘(1) Shares allotted by a company, and any premium on them, may be paid up in money or money’s worth (including goodwill and know-how).
(2) This section does not prevent a company—
(a) from allotting bonus shares to its members, or
(b) from paying up, with sums available for the purpose, any amounts for the time being unpaid on any of its shares (whether on account of the nominal value of the shares or by way of premium).
(3) This section has effect subject to the following provisions of this Chapter (additional rules for public companies).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 88

Meaning of payment in cash
‘(1) The following provisions have effect for the purposes of the Companies Acts.
(2) A share in a company is deemed paid up (as to its nominal value or any premium on it) in cash, or allotted for cash, if the consideration received for the allotment or payment up is—
(a) cash received by the company,
(b) a cheque received by the company in good faith that the directors have no reason for suspecting will not be paid,
(c) a release of a liability of the company for a liquidated sum, or
(d) an undertaking to pay cash to the company at a future date.
(3) In relation to the allotment or payment up of shares in a company—
(a) the payment of cash to a person other than the company, or
(b) an undertaking to pay cash to a person other than the company,
counts as consideration other than cash.
This does not apply for the purposes of Chapter (allotment of equity securities: existing shareholders’ right of pre-emption) (allotment of equity securities: existing shareholders’ right of pre-emption).
(4) For the purpose of determining whether a share is or is to be allotted for cash, or paid up in cash, “cash includes foreign currency.’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 89

Public companies: shares taken by subscribers of memorandum
‘Shares taken by a subscriber to the memorandum of a public company in pursuance of an undertaking of his in the memorandum, and any premium on the shares, must be paid up in cash.’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 90

Public companies: must not accept undertaking to do work or perform services
‘(1) A public company must not accept at any time, in payment up of its shares or any premium on them, an undertaking given by any person that he or another should do work or perform services for the company or any other person.
(2) If a public company accepts such an undertaking in payment up of its shares or any premium on them, the holder of the shares when they or the premium are treated as paid up (in whole or in part) by the undertaking is liable—
(a) to pay the company in respect of those shares an amount equal to their nominal value, together with the whole of any premium or, if the case so requires, such proportion of that amount as is treated as paid up by the undertaking; and
(b) to pay interest at the appropriate rate on the amount payable under paragraph (a).
(3) The reference in subsection (2) to the holder of shares includes a person who has an unconditional right—
(a) to be included in the company’s register of members in respect of those shares, or
(b) to have an instrument of transfer of them executed in his favour.’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 91

Public companies: shares must be at least one-quarter paid up
‘(1) A public company must not allot a share except as paid up at least as to one-quarter of its nominal value and the whole of any premium on it.
(2) This does not apply to shares allotted in pursuance of an employees’ share scheme.
(3) If a company allots a share in contravention of this section—
(a) the share is to be treated as if one-quarter of its nominal value, together with the whole of any premium on it, had been received, and
(b) the allottee is liable to pay the company the minimum amount which should have been received in respect of the share under subsection (1) (less the value of any consideration actually applied in payment up, to any extent, of the share and any premium on it), with interest at the appropriate rate.
(4) Subsection (3) does not apply to the allotment of bonus shares, unless the allottee knew or ought to have known the shares were allotted in contravention of this section.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 92

Public companies: payment by long-term undertaking
‘(1) A public company must not allot shares as fully or partly paid up (as to their nominal value or any premium on them) otherwise than in cash if the consideration for the allotment is or includes an undertaking which is to be, or may be, performed more than five years after the date of the allotment.
(2) If a company allots shares in contravention of subsection (1), the allottee is liable to pay the company an amount equal to the aggregate of their nominal value and the whole of any premium (or, if the case so requires, so much of that aggregate as is treated as paid up by the undertaking), with interest at the appropriate rate.
(3) Where a contract for the allotment of shares does not contravene subsection (1), any variation of the contract that has the effect that the contract would have contravened the subsection, if the terms of the contract as varied had been its original terms, is void.
This applies also to the variation by a public company of the terms of a contract entered into before the company was re-registered as a public company.
(4) Where—
(a) a public company allots shares for a consideration which consists of or includes (in accordance with subsection (1)) an undertaking that is to be performed within five years of the allotment, and
(b) the undertaking is not performed within the period allowed by the contract for the allotment of the shares,
the allottee is liable to pay the company, at the end of the period so allowed, an amount equal to the aggregate of the nominal value of the shares and the whole of any premium (or, if the case so requires, so much of that aggregate as is treated as paid up by the undertaking), with interest at the appropriate rate.
(5) References in this section to a contract for the allotment of shares include an ancillary contract relating to payment in respect of them.’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 93

Liability of subsequent holders of shares
‘(1) If a person becomes a holder of shares in respect of which—
(a) there has been a contravention of any provision of this Chapter, and
(b) by virtue of that contravention another is liable to pay any amount under the provision contravened,
that person is also liable to pay that amount (jointly and severally with any other person so liable), subject as follows.
(2) A person otherwise liable under subsection (1) is exempted from that liability if either—
(a) he is a purchaser for value and, at the time of the purchase, he did not have actual notice of the contravention concerned, or
(b) he derived title to the shares (directly or indirectly) from a person who became a holder of them after the contravention and was not liable under subsection (1).
(3) References in this section to a holder, in relation to shares in a company, include any person who has an unconditional right—
(a) to be included in the company’s register of members in respect of those shares, or
(b) to have an instrument of transfer of the shares executed in his favour.
(4) This section applies in relation to a failure to carry out a term of a contract as mentioned in section (Public companies: payment by long-term undertaking)(4) (public companies: payment by long-term undertaking) as they apply in relation to a contravention of a provision of this Chapter.’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 94

Power of court to grant relief
‘(1) This section applies in relation to liability under—
section (Public companies: must not accept undertaking to do work or perform services)(2) (liability of allottee in case of breach by public company: of prohibition on accepting undertaking to do work or perform services),
section (Public companies: payment by long-term undertaking)(2) or (4) (liability of allottee in case of breach by public company of prohibition on payment by long-term undertaking), or
section (Liability of subsequent holders of shares) (liability of subsequent holders of shares) as it applies in relation to a contravention of those sections.
(2) A person who—
(a) is subject to any such liability to a company in relation to payment in respect of shares in the company, or
(b) is subject to any such liability to a company by virtue of an undertaking given to it in, or in connection with, payment for shares in the company,
may apply to the court to be exempted in whole or in part from the liability.
(3) In the case of a liability within subsection (2)(a), the court may exempt the applicant from the liability only if and to the extent that it appears to the court just and equitable to do so having regard to—
(a) whether the applicant has paid, or is liable to pay, any amount in respect of—
(i) any other liability arising in relation to those shares under any provision of this Chapter, or
(ii) any liability arising by virtue of any undertaking given in or in connection with payment for those shares;
(b) whether any person other than the applicant has paid or is likely to pay, whether in pursuance of any order of the court or otherwise, any such amount;
(c) whether the applicant or any other person—
(i) has performed in whole or in part, or is likely so to perform any such undertaking, or
(ii) has done or is likely to do any other thing in payment or part payment for the shares.
(4) In the case of a liability within subsection (2)(b), the court may exempt the applicant from the liability only if and to the extent that it appears to the court just and equitable to do so having regard to—
(a) whether the applicant has paid or is liable to pay any amount in respect of liability arising in relation to the shares under any provision of this Chapter;
(b) whether any person other than the applicant has paid or is likely to pay, whether in pursuance of any order of the court or otherwise, any such amount.
(5) In determining whether it should exempt the applicant in whole or in part from any liability, the court must have regard to the following overriding principles—
(a) a company that has allotted shares should receive money or money’s worth at least equal in value to the aggregate of the nominal value of those shares and the whole of any premium or, if the case so requires, so much of that aggregate as is treated as paid up;
(b) subject to that, where a company would, if the court did not grant the exemption, have more than one remedy against a particular person, it should be for the company to decide which remedy it should remain entitled to pursue.
(6) If a person brings proceedings against another (“the contributor”) for a contribution in respect of liability to a company arising under any provision of this Chapter and it appears to the court that the contributor is liable to make such a contribution, the court may, if and to the extent that it appears to it, just and equitable to do so having regard to the respective culpability (in respect of the liability to the company) of the contributor and the person bringing the proceedings—
(a) exempt the contributor in whole or in part from his liability to make such a contribution, or
(b) order the contributor to make a larger contribution than, but for this subsection, he would be liable to make.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 95

Penalty for contravention of this Chapter
‘(1) If a company contravenes any of the provisions of this Chapter, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(2) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 96

Enforceability of undertakings to do work etc
‘(1) An undertaking given by any person, in or in connection with payment for shares in a company, to do work or perform services or to do any other thing, if it is enforceable by the company apart from this Chapter, is so enforceable notwithstanding that there has been a contravention in relation to it of a provision of this Chapter.
(2) This is without prejudice to section (Power of court to grant relief) (power of court to grant relief etc in respect of liabilities).’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 97

The appropriate rate of interest
‘(1) For the purposes of this Chapter the “appropriate rate” of interest is 5% per annum or such other rate as may be specified by order made by the Secretary of State.
(2) An order under this section is subject to negative resolution procedure.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 98

Public company: valuation of non-cash consideration for shares
‘(1) A public company must not allot shares as fully or partly paid up (as to their nominal value or any premium on them) otherwise than in cash unless—
(a) the consideration for the allotment has been independently valued in accordance with the provisions of this Chapter,
(b) the valuer’s report has been made to the company during the six months immediately preceding the allotment of the shares, and
(c) a copy of the report has been sent to the proposed allottee.
(2) For this purpose the application of an amount standing to the credit of—
(a) any of a company’s reserve accounts, or
(b) its profit and loss account,
in paying up (to any extent) shares allotted to members of the company, or premiums on shares so allotted, does not count as consideration for the allotment.
(3) If a company allots shares in contravention of subsection (1) and either—
(a) the allottee has not received the valuer’s report required to be sent to him, or
(b) there has been some other contravention of the requirements of this Chapter that the allottee knew or ought to have known amounted to a contravention,
the allottee is liable to pay the company an amount equal to the aggregate of the nominal value of the shares and the whole of any premium (or, if the case so requires, so much of that aggregate as is treated as paid up by the consideration), with interest at the appropriate rate.
(4) This section has effect subject to—
section (exception to valuation requirement: arrangement with another company) (exception to valuation requirement: arrangement with another company), and
section (exception to valuation requirement: merger) (exception to valuation requirement: merger).’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 99

Exception to valuation requirement: arrangement with another company
‘(1) Section (Public company: valuation of non-cash consideration for shares) (valuation of non-cash consideration) does not apply to the allotment of shares by a company (“company A”) in connection with an arrangement to which this section applies.
(2) This section applies to an arrangement for the allotment of shares in company A on terms that the whole or part of the consideration for the shares allotted is to be provided by—
(a) the transfer to that company, or
(b) the cancellation,
of all or some of the shares, or of all or some of the shares of a particular class, in another company (“company B”).
(3) It is immaterial whether the arrangement provides for the issue to company A of shares, or shares of any particular class, in company B.
(4) This section applies to an arrangement only if under the arrangement it is open to all the holders of the shares in company B (or, where the arrangement applies only to shares of a particular class, to all the holders of shares of that class) to take part in the arrangement.
(5) In determining whether that is the case, the following shall be disregarded—
(a) shares held by or by a nominee of company A;
(b) shares held by or by a nominee of a company which is—
(i) the holding company, or a subsidiary, of company A, or
(ii) a subsidiary of such a holding company;
(c) shares held as treasury shares by company B.
(6) In this section—
(a) “arrangement” means any agreement, scheme or arrangement (including an arrangement sanctioned in accordance with—
(i) Part (Arrangements and reconstructions) (arrangements and reconstructions), or
(ii) section 110 of the Insolvency Act 1986 (c. 45) or Article 96 of the Insolvency (Northern Ireland) Order 1989 (S.I.1989/2405 (N.I.19)) (liquidator in winding up accepting shares as consideration for sale of company property), and
(b) “company”, except in reference to company A, includes any body corporate.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 100

Exception to valuation requirement: merger
‘(1) Section (Public company: valuation of non-cash consideration for shares) (valuation of non-cash consideration) does not apply to the allotment of shares by a company in connection with a proposed merger with another company.
(2) A proposed merger is where one of the companies proposes to acquire all the assets and liabilities of the other in exchange for the issue of shares or other securities of that one to shareholders of the other, with or without any cash payment to shareholders.
(3) In this section “company”, in reference to the other company, includes any body corporate.’. —[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 101

Non-cash consideration for shares: requirements as to valuation and report
‘(1) The provisions of sections (Valuation by independent person) to (Valuer entitled to full disclosure) (general provisions as to independent valuation and report) apply to the valuation and report required by section (Public company: valuation of non-cash consideration for shares) (public company: valuation of non-cash consideration for shares).
(2) The valuer’s report must state—
(a) the nominal value of the shares to be wholly or partly paid for by the consideration in question;
(b) the amount of any premium payable on the shares;
(c) the description of the consideration and, as respects so much of the consideration as he himself has valued, a description of that part of the consideration, the method used to value it and the date of the valuation;
(d) the extent to which the nominal value of the shares and any premium are to be treated as paid up—
(i) by the consideration;
(ii) in cash.
(3) The valuer’s report must contain or be accompanied by a note by him—
(a) in the case of a valuation made by a person other than himself, that it appeared to himself reasonable to arrange for it to be so made or to accept a valuation so made,
(b) whoever made the valuation that the method of valuation was reasonable in all the circumstances,
(c) that it appears to the valuer that there has been no material change in the value of the consideration in question since the valuation, and
(d) that, on the basis of the valuation, the value of the consideration, together with any cash by which the nominal value of the shares or any premium payable on them is to be paid up, is not less than so much of the aggregate of the nominal value and the whole of any such premium as is treated as paid up by the consideration and any such cash.
(4) Where the consideration to be valued is accepted partly in payment up of the nominal value of the shares and any premium and partly for some other consideration given by the company, section (Public company: valuation of non-cash consideration for shares) and the preceding provisions of this section apply as if references to the consideration accepted by the company included the proportion of that consideration that is properly attributable to the payment up of that value and any premium.
(5) In such a case—
(a) the valuer must carry out, or arrange for, such other valuations as will enable him to determine that proportion, and
(b) his report must state what valuations have been made under this subsection and also the reason for, and method and date of, any such valuation and any other matters which may be relevant to that determination.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 102

Copy of report to be delivered to registrar
‘(1) A company to which a report is made under section (Public company: valuation of non-cash consideration for shares) as to the value of any consideration for which, or partly for which, it proposes to allot shares must deliver a copy of the report to the registrar for registration.
(2) The copy must be delivered at the same time that the company files the return of the allotment of those shares under section (Return of allotment by limited company) (return of allotment by limited company).
(3) If default is made in complying with subsection (1) or (2), an offence is committed by every officer of the company who is in default.
(4) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum and, for continued contravention, a daily default fine not exceeding one-tenth of the statutory maximum.
(5) In the case of default in delivering to the registrar any document as required by this section, any person liable for the default may apply to the court for relief.
(6) The court, if satisfied—
(a) that the omission to deliver the document was accidental or due to inadvertence, or
(b) that it is just and equitable to grant relief,
may make an order extending the time for delivery of the document for such period as the court thinks proper.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 103

Public company: agreement for transfer of non-cash asset in initial period
‘(1) A public company formed as such must not enter into an agreement —
(a) with a person who is a subscriber to the company’s memorandum,
(b) for the transfer by him to the company, or another, before the end of the company’s initial period of one or more non-cash assets, and
(c) under which the consideration for the transfer to be given by the company is at the time of the agreement equal in value to one-tenth or more of the company’s issued share capital.
unless the conditions referred to below have been complied with.
(2) The company’s “initial period” means the period of two years beginning with the date of the company being issued with a certificate under section (Public company: requirement as to minimum share capital) (trading certificate).
(3) The conditions are those specified in—
section (Agreement for transfer of non-cash asset: requirement of independent valuation) (requirement of independent valuation), and
section (Agreement for transfer of non-cash asset: requirement of approval by members) (requirement of approval by members).
(4) This section does not apply where—
(a) it is part of the company’s ordinary business to acquire, or arrange for other persons to acquire, assets of a particular description, and
(b) the agreement is entered into by the company in the ordinary course of that business.
(5) This section does not apply to an agreement entered into by the company under the supervision of the court or of an officer authorised by the court for the purpose.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 104

Agreement for transfer of non-cash asset: requirement of independent valuation
‘(1) The following conditions must have been complied with—
(a) the consideration to be received by the company, and any consideration other than cash to be given by the company, must have been independently valued in accordance with the provisions of this Chapter,
(b) the valuer’s report must have been made to the company during the six months immediately preceding the date of the agreement, and
(c) a copy of the report must have been sent to the other party to the proposed agreement not later than the date on which copies have to be circulated to members under section (Agreement for transfer of non-cash asset: requirement of approval by members)(3).
(2) The reference in subsection (1)(a) to the consideration to be received by the company is to the asset to be transferred to it or, as the case may be, to the advantage to the company of the asset’s transfer to another person.
(3) The reference in subsection (1)(c) to the other party to the proposed agreement is to the person referred to in section (Public company: agreement for transfer of non-cash asset in initial period)(1)(a).
If he has received a copy of the report under section (Agreement for transfer of non-cash asset: requirement of approval by members) in his capacity as a member of the company, it is not necessary to send another copy under this section.
(4) This section does not affect any requirement to value any consideration for purposes of section (Public company: valuation of non-cash consideration for shares) (valuation of non-cash consideration for shares).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 105

Agreement for transfer of non-cash asset: requirements as to valuation and report
‘(1) The provisions of sections (Valuation by independent person) to (Valuer entitled to full disclosure) (general provisions as to independent valuation and report) apply to the valuation and report required by section (Agreement for transfer of non-cash asset: requirement of independent valuation) (public company: transfer of non-cash asset).
(2) The valuer’s report must state—
(a) the consideration to be received by the company, describing the asset in question (specifying the amount to be received in cash) and the consideration to be given by the company (specifying the amount to be given in cash), and
(b) the method and date of valuation.
(3) The valuer’s report must contain or be accompanied by a note by him—
(a) in the case of a valuation made by a person other than himself, that it appeared to himself reasonable to arrange for it to be so made or to accept a valuation so made,
(b) whoever made the valuation, that the method of valuation was reasonable in all the circumstances,
(c) that it appears to the valuer that there has been no material change in the value of the consideration in question since the valuation, and
(d) that, on the basis of the valuation, the value of the consideration to be received by the company is not less than the value of the consideration to be given by it.
(4) Any reference in section (Agreement for transfer of non-cash asset: requirement of independent valuation) or this section to consideration given for the transfer of an asset includes consideration given partly for its transfer.
(5) In such a case—
(a) the value of any consideration partly so given is to be taken as the proportion of the consideration properly attributable to its transfer,
(b) the valuer must carry out or arrange for such valuations of anything else as will enable him to determine that proportion, and
(c) his report must state what valuations have been made for that purpose and also the reason for and method and date of any such valuation and any other matters which may be relevant to that determination.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 106

Agreement for transfer of non-cash asset: requirement of approval by members
‘(1) The following conditions must have been complied with—
(a) the terms of the agreement must have been approved by an ordinary resolution of the company,
(b) the requirements of this section must have been complied with as respects the circulation to members of copies of the valuer’s report under section (Agreement for transfer of non-cash asset: requirement of independent valuation), and
(c) a copy of the proposed resolution must have been sent to the other party to the proposed agreement.
(2) The reference in subsection (1)(c) to the other party to the proposed agreement is to the person referred to in section (Public company: agreement for transfer of non-cash asset in initial period)(1)(a).
(3) The requirements of this section as to circulation of copies of the valuer’s report are as follows—
(a) if the resolution is proposed as a written resolution, copies of the valuer’s report must be sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him;
(b) if the resolution is proposed at a general meeting, copies of the valuer’s report must be circulated to the members entitled to notice of the meeting not later than the date on which notice of the meeting is given.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 107

Copy of resolution to be delivered to registrar
‘(1) A company that has passed a resolution under section (Agreement for transfer of non-cash asset: requirement of approval by members) with respect to the transfer of an asset must, within 15 days of doing so, deliver to the registrar a copy of the resolution together with the valuer’s report required by that section.
(2) If a company fails to comply with subsection (1), an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(3) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 108

Adaptation of provisions in relation to company re-registering as public
‘The provisions of sections (Public company: agreement for transfer of non-cash asset in initial period) to (Copy of resolution to be delivered to registrar) (public companies: transfer of non-cash assets) apply with the following adaptations in relation to a company re-registered as a public company—
(a) the reference in section (Public company: agreement for transfer of non-cash asset in initial period)(1)(a) to a person who is a subscriber to the company’s memorandum shall be read as a reference to a person who is a member of the company on the date of re-registration;
(b) the reference in section (Public company: agreement for transfer of non-cash asset in initial period)(2) to the date of the company being issued with a certificate under section (Public company: requirement as to minimum share capital) (trading certificate) shall be read as a reference to the date of re-registration.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 109

Agreement for transfer of non-cash asset: effect of contravention
‘(1) This section applies where a public company enters into an agreement in contravention of section (Public company: agreement for transfer of non-cash asset in initial period) and either—
(a) the other party to the agreement has not received the valuer’s report required to be sent to him, or
(b) there has been some other contravention of the requirements of this Chapter that the other party to the agreement knew or ought to have known amounted to a contravention.
(2) In those circumstances—
(a) the company is entitled to recover from that person any consideration given by it under the agreement, or an amount equal to the value of the consideration at the time of the agreement, and
(b) the agreement, so far as not carried out, is void.
(3) If the agreement is or includes an agreement for the allotment of shares in the company, then—
(a) whether or not the agreement also contravenes section (Public company: valuation of non-cash consideration for shares) (valuation of non-cash consideration for shares), this section does not apply to it in so far as it is for the allotment of shares, and
(b) the allottee is liable to pay the company an amount equal to the aggregate of the nominal value of the shares and the whole of any premium (or, if the case so requires, so much of that aggregate as is treated as paid up by the consideration), with interest at the appropriate rate.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 110

Liability of subsequent holders of shares
‘(1) If a person becomes a holder of shares in respect of which—
(a) there has been a contravention of section (Public company: valuation of non-cash consideration for shares) (public company: valuation of non-cash consideration for shares), and
(b) by virtue of that contravention another is liable to pay any amount under the provision contravened,
that person is also liable to pay that amount (jointly and severally with any other person so liable), unless he is exempted from liability under subsection (3) below.
(2) If a company enters into an agreement in contravention of section (Public company: agreement for transfer of non-cash asset in initial period) and—
(a) the agreement is or includes an agreement for the allotment of shares in the company,
(b) a person becomes a holder of shares allotted under the agreement, and
(c) by virtue of the agreement and allotment under it another person is liable to pay an amount under section (Agreement for transfer of non-cash asset: effect of contravention),
the person who becomes the holder of the shares is also liable to pay that amount (jointly and severally with any other person so liable), unless he is exempted from liability under subsection (3) below.
This applies whether or not the agreement also contravenes section (Public company: valuation of non-cash consideration for shares).
(3) A person otherwise liable under subsection (1) or (2) is exempted from that liability if either—
(a) he is a purchaser for value and, at the time of the purchase, he did not have actual notice of the contravention concerned, or
(b) he derived title to the shares (directly or indirectly) from a person who became a holder of them after the contravention and was not liable under subsection (1).
(4) References in this section to a holder, in relation to shares in a company, include any person who has an unconditional right—
(a) to be included in the company’s register of members in respect of those shares, or
(b) to have an instrument of transfer of the shares executed in his favour.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 111

Power of court to grant relief
‘(1) A person who—
(a) is liable to a company under any provision of this Chapter in relation to payment in respect of any shares in the company, or
(b) is liable to a company by virtue of an undertaking given to it in, or in connection with, payment for any shares in the company,
may apply to the court to be exempted in whole or in part from the liability.
(2) In the case of a liability within subsection (1)(a), the court may exempt the applicant from the liability only if and to the extent that it appears to the court just and equitable to do so having regard to—
(a) whether the applicant has paid, or is liable to pay, any amount in respect of—
(i) any other liability arising in relation to those shares under any provision of this Chapter, or
(ii) any liability arising by virtue of any undertaking given in or in connection with payment for those shares;
(b) whether any person other than the applicant has paid or is likely to pay, whether in pursuance of any order of the court or otherwise, any such amount;
(c) whether the applicant or any other person—
(i) has performed in whole or in part, or is likely so to perform any such undertaking, or
(ii) has done or is likely to do any other thing in payment or part payment for the shares.
(3) In the case of a liability within subsection (1)(b), the court may exempt the applicant from the liability only if and to the extent that it appears to the court just and equitable to do so having regard to—
(a) whether the applicant has paid or is liable to pay any amount in respect of liability arising in relation to the shares under any provision of this Chapter;
(b) whether any person other than the applicant has paid or is likely to pay, whether in pursuance of any order of the court or otherwise, any such amount.
(4) In determining whether it should exempt the applicant in whole or in part from any liability, the court must have regard to the following overriding principles—
(a) that a company that has allotted shares should receive money or money’s worth at least equal in value to the aggregate of the nominal value of those shares and the whole of any premium or, if the case so requires, so much of that aggregate as is treated as paid up;
(b) subject to this, that where such a company would, if the court did not grant the exemption, have more than one remedy against a particular person, it should be for the company to decide which remedy it should remain entitled to pursue.
(5) If a person brings proceedings against another (“the contributor”) for a contribution in respect of liability to a company arising under any provision of this Chapter and it appears to the court that the contributor is liable to make such a contribution, the court may, if and to the extent that it appears to it, just and equitable to do so having regard to the respective culpability (in respect of the liability to the company) of the contributor and the person bringing the proceedings—
(a) exempt the contributor in whole or in part from his liability to make such a contribution, or
(b) order the contributor to make a larger contribution than, but for this subsection, he would be liable to make.
(6) Where a person is liable to a company under section (Agreement for transfer of non-cash asset: effect of contravention)(2) (agreement for transfer of non-cash asset: effect of contravention), the court may, on application, exempt him in whole or in part from that liability if and to the extent that it appears to the court to be just and equitable to do so having regard to any benefit accruing to the company by virtue of anything done by him towards the carrying out of the agreement mentioned in that subsection.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 112

Penalty for contravention of this Chapter
‘(1) This section applies where a company contravenes——
section (Public company: valuation of non-cash consideration for shares) (public company allotting shares for non-cash consideration), or
section (Public company: agreement for transfer of non-cash asset in initial period) (public company entering into agreement for transfer of non-cash asset).
(2) An offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(3) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 113

Enforceability of undertakings to do work etc
‘(1) An undertaking given by any person, in or in connection with payment for shares in a company, to do work or perform services or to do any other thing, if it is enforceable by the company apart from this Chapter, is so enforceable notwithstanding that there has been a contravention in relation to it of a provision of this Chapter.
(2) This is without prejudice to section (Power of court to grant relief) (power of court to grant relief etc in respect of liabilities).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 114

The appropriate rate of interest
‘(1) For the purposes of this Chapter the “appropriate rate” of interest is 5% per annum or such other rate as may be specified by order made by the Secretary of State.
(2) An order under this section is subject to negative resolution procedure.’—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 115

Application of share premiums
‘(1) If a company issues shares at a premium, whether for cash or otherwise, a sum equal to the aggregate amount or value of the premiums on those shares must be transferred to an account called “the share premium account”.
(2) Where, on issuing shares, a company has transferred a sum to the share premium account, it may use that sum to write off—
(a) the expenses of the issue of those shares;
(b) any commission paid on the issue of those shares.
(3) The company may use the share premium account to pay up new shares to be allotted to members as fully paid bonus shares.
(4) Subject to subsections (2) and (3), the provisions of the Companies Acts relating to the reduction of a company’s share capital apply as if the share premium account were part of its paid-up share capital.
(5) This section has effect subject to—
section (Group reconstruction relief) (group reconstruction relief);
section (Merger relief) (merger relief);
section (Power to make further provision by regulations) (power to make further provisions by regulations).
(6) In this Chapter “the issuing company” means the company issuing shares as mentioned in subsection (1) above.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 116

Group reconstruction relief
‘(1) This section applies where the issuing company—
(a) is a wholly owned subsidiary of another company (“the holding company”), and
(b) allots shares—
(i) to the holding company or
(ii) to another wholly-owned subsidiary of the holding company,
in consideration for the transfer to the issuing company of non-cash assets of a company (“the transferor company”) that is a member of the group of companies that comprises the holding company and all its wholly-owned subsidiaries.
(2) Where the shares in the issuing company allotted in consideration for the transfer are issued at a premium, the issuing company is not required by section (Application of share premiums) to transfer any amount in excess of the minimum premium value to the share premium account.
(3) The minimum premium value means the amount (if any) by which the base value of the consideration for the shares allotted exceeds the aggregate nominal value of the shares.
(4) The base value of the consideration for the shares allotted is the amount by which the base value of the assets transferred exceeds the base value of any liabilities of the transferor company assumed by the issuing company as part of the consideration for the assets transferred.
(5) For the purposes of this section—
(a) the base value of assets transferred is taken as—
(i) the cost of those assets to the transferor company, or
(ii) if less, the amount at which those assets are stated in the transferor company’s accounting records immediately before the transfer;
(b) the base value of the liabilities assumed is taken as the amount at which they are stated in the transferor company’s accounting records immediately before the transfer.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 117

Merger relief
‘(1) This section applies where the issuing company has secured at least a 90% equity holding in another company in pursuance of an arrangement providing for the allotment of equity shares in the issuing company on terms that the consideration for the shares allotted is to be provided—
(a) by the issue or transfer to the issuing company of equity shares in the other company, or
(b) by the cancellation of any such shares not held by the issuing company.
(2) If the equity shares in the issuing company allotted in pursuance of the arrangement in consideration for the acquisition or cancellation of equity shares in the other company are issued at a premium, section (Application of share premiums) does not apply to the premiums on those shares.
(3) Where the arrangement also provides for the allotment of any shares in the issuing company on terms that the consideration for those shares is to be provided—
(a) by the issue or transfer to the issuing company of non-equity shares in the other company, or
(b) by the cancellation of any such shares in that company not held by the issuing company,
relief under subsection (2) extends to any shares in the issuing company allotted on those terms in pursuance of the arrangement.
(4) This section does not apply in a case falling within section (Group reconstruction relief) (group reconstruction relief).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 118

Merger relief: meaning of 90% equity holding
‘(1) The following provisions have effect to determine for the purposes of section (Merger relief) (merger relief) whether a company (“company A”) has secured a 90% equity holding in another company (“company B”) in pursuance of such an arrangement as is mentioned in subsection (1) of that section.
(2) Company A has a 90% equity holding in company B if in consequence of an acquisition or cancellation of equity shares in company B (in pursuance of that arrangement) it holds equity shares in company B of an aggregate amount equal to 90% or more of the nominal value of that company’s equity share capital.
(3) For this purpose—
(a) it is immaterial whether any of those shares were acquired in pursuance of the arrangement; and
(b) shares in company B held by the company as treasury shares are excluded in determining the nominal value of company B’s share capital.
(4) Where the equity share capital of company B is divided into different classes of shares, company A is not regarded as having a 90% equity holding in company B unless the requirements of subsection (2) are met in relation to each of those classes of shares taken separately.
(5) For the purposes of this section shares held by—
(a) a company that is company A’s holding company or subsidiary, or
(b) a subsidiary of company A’s holding company, or
(c) its or their nominees,
are treated as held by company A.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 119

Power to make further provision by regulations
‘(1) The Secretary of State may by regulations make such provision as he thinks appropriate—
(a) for relieving companies from the requirements of section (Application of share premiums) (application of share premiums) in relation to premiums other than cash premiums;
(b) for restricting or otherwise modifying any relief from those requirements provided by this Chapter.
(2) Regulations under this section are subject to affirmative resolution procedure.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 120

Relief may be reflected in company’s balance sheet
‘An amount corresponding to the amount representing the premiums, or part of the premiums, on shares issued by a company that by virtue of any relief under this Chapter is not included in the company’s share premium account may also be disregarded in determining the amount at which any shares or other consideration provided for the shares issued is to be included in the company’s balance sheet.’—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 121

Interpretation of this Chapter
‘(1) In this Chapter—
“arrangement” means any agreement, scheme or arrangement (including an arrangement sanctioned in accordance with—
(e) Part (Arrangements and reconstructions) (arrangements and reconstructions), or
(f) section 110 of the Insolvency Act 1986 (c. 45) or Article 96 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)) (liquidator in winding up accepting shares as consideration for sale of company property));
“company”, except in reference to the issuing company, includes any body corporate;
“equity shares” means shares comprised in a company’s equity share capital, and “non-equity shares” means shares (of any class) that are not so comprised;
“the issuing company” has the meaning given by section (Application of share premiums)(6).
(2) References in this Chapter (however expressed) to—
(a) the acquisition by a company of shares in another company, and
(b) the issue or allotment of shares to, or the transfer of shares to or by, a company,
include (respectively) the acquisition of shares by, and the issue or allotment or transfer of shares to or by, a nominee of that company.
The reference in section (Group reconstruction relief) to the transferor company shall be read accordingly.
(3) References in this Chapter to the transfer of shares in a company include the transfer of a right to be included in the company’s register of members in respect of those shares.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 122

Alteration of share capital of limited company
‘(1) A limited company having a share capital may not alter its share capital except in the following ways.
(2) The company may—
(a) increase its share capital by allotting new shares in accordance with this Part, or
(b) reduce its share capital in accordance with Chapter (Reduction of share capital) of this Part.
(3) The company may—
(a) sub-divide or consolidate all or any of its share capital in accordance with section (Sub-division or consolidation of shares), or
(b) reconvert stock into shares in accordance with section (Re-conversion of stock into shares).
(4) The company may redenominate all or any of its shares in accordance with section (Redenomination of share capital) and may reduce its share capital in accordance with section (Reduction of capital in connection with redenomination) in connection with such a redenomination.
(5) Nothing in this section affects—
(a) the power of a company to purchase its own shares, or to redeem shares, in accordance with Part 19;
(b) the power of a company to purchase shares in pursuance of an order of the court under—
(i) section 98 (application to court to cancel resolution for re-registration as a private company),
(ii) section (Application to court to cancel resolution)(6) (powers of court on objection to redemption or purchase of shares out of capital),
(iii) section 534 (remedial order in case of breach of prohibition of public offers by private company), or
(iv) Part (Protection of members against unfair prejudice) (protection of members against unfair prejudice);
(c) the forfeiture of shares, or the acceptance of shares surrendered in lieu, in pursuance of the company’s articles, for failure to pay any sum payable in respect of the shares;
(d) the cancellation of shares under section (Duty to cancel shares in public company held by or for the company) (duty to cancel shares held by or for a public company);
(e) the power of a company—
(i) to enter into a compromise or arrangement in accordance with Part (Arrangements and reconstructions) (arrangements and reconstructions), or
(ii) to do anything required to comply with an order of the court on an application under that Part.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 123

Sub-division or consolidation of shares
‘(1) A limited company having a share capital may—
(a) sub-divide its shares, or any of them, into shares of a smaller nominal amount than its existing shares, or
(b) consolidate and divide all or any of its share capital into shares of a larger nominal amount than its existing shares.
(2) In any sub-division, consolidation or division of shares under this section, the proportion between the amount paid and the amount (if any) unpaid on each resulting share must be the same as it was in the case of the share from which that share is derived.
(3) A company may exercise a power conferred by this section only if its members have passed an ordinary resolution authorising it to do so.
(4) A resolution under subsection (3) may authorise a company—
(a) to exercise more than one of the powers conferred by this section;
(b) to exercise a power on more than one occasion;
(c) to exercise a power at a specified time or in specified circumstances.
(5) The company’s articles may exclude or restrict the exercise of any power conferred by this section.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 124

Notice to registrar of sub-division or consolidation
‘(1) If a company exercises the power conferred by section (Sub-division or consolidation of shares) (sub-division or consolidation of shares) it must within one month after doing so give notice to the registrar, specifying the shares affected.
(2) The notice must be accompanied by a statement of capital.
(3) The statement of capital must state with respect to the company’s share capital immediately following the exercise of the power—
(a) the total number of shares of the company,
(b) the aggregate nominal value of those shares,
(c) for each class of shares—
(i) prescribed particulars of the rights attached to the shares,
(ii) the total number of shares of that class, and
(iii) the aggregate nominal value of shares of that class, and
(d) the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium).
(4) If default is made in complying with this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(5) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 125

Re-conversion of stock into shares
‘(1) A limited company that has converted paid-up shares into stock (before the repeal by this Act of the power to do so) may re-convert that stock into paid-up shares of any nominal value.
(2) A company may exercise the power conferred by this section only if its members have passed an ordinary resolution authorising it to do so.
(3) A resolution under subsection (2) may authorise a company to exercise the power conferred by this section—
(a) on more than one occasion;
(b) at a specified time or in specified circumstances.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 126

Notice to registrar of re-conversion of stock into shares
‘(1) If a company exercises a power conferred by section (Re-conversion of stock into shares) (reconversion of stock into shares) it must within one month after doing so give notice to the registrar, specifying the stock affected.
(2) The notice must be accompanied by a statement of capital.
(3) The statement of capital must state with respect to the company’s share capital immediately following the exercise of the power—
(a) the total number of shares of the company,
(b) the aggregate nominal value of those shares,
(c) for each class of shares—
(i) prescribed particulars of the rights attached to the shares,
(ii) the total number of shares of that class, and
(iii) the aggregate nominal value of shares of that class, and
(d) the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium).
(4) If default is made in complying this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(5) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 127

Redenomination of share capital
‘(1) A limited company having a share capital may by ordinary resolution redenominate its share capital or any class of its share capital.
“Redenominate” means convert shares from having a fixed nominal value in one currency to having a fixed nominal value in another currency.
(2) The conversion must be made at an appropriate spot rate of exchange specified in the resolution.
(3) The rate must be either—
(a) a rate prevailing on a day specified in the resolution, or
(b) a rate determined by taking the average of rates prevailing on each consecutive day of a period specified in the resolution.
The day or period specified for the purposes of paragraph (a) or (b) must be within the period of 28 days ending on the day before the resolution is passed.
(4) A resolution under this section may specify conditions which must be met before the redenomination takes effect.
(5) Redenomination in accordance with a resolution under this section takes effect—
(a) on the day on which the resolution is passed, or
(b) on such later day as may be determined in accordance with the resolution.
(6) A resolution under this section lapses if the redenomination for which it provides has not taken effect at the end of the period of 28 days beginning on the date on which it is passed.
(7) A company’s articles may prohibit or restrict the exercise of the power conferred by this section.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 128

Calculation of new nominal values
‘ ‘For each class of share the new nominal value of each share is calculated as follows:
Step One
Take the aggregate of the old nominal values of all the shares of that class.
Step Two
Translate that amount into the new currency at the rate of exchange specified in the resolution.
Step Three
Divide that amount by the number of shares in the class.’.—[Margaret Hodge.]

Brought up, and added to the Bill..

New Clause 129

Effect of redenomination
‘(1) The redenomination of shares does not affect any rights or obligations of members under the company’s constitution, or any restrictions affecting members under the company’s constitution.
In particular, it does not affect entitlement to dividends (including entitlement to dividends in a particular currency), voting rights or any liability in respect of amounts unpaid on shares.
(2) For this purpose the company’s constitution includes the terms on which any shares of the company are allotted or held.
(3) Subject to subsection (1), references to the old nominal value of the shares in any agreement or statement, or in any deed, instrument or document, shall (unless the context otherwise requires) be read after the resolution takes effect as references to the new nominal value of the shares.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 130

Notice to registrar of redenomination
‘(1) If a limited company having a share capital redenominates any of its share capital, it must within one month after doing so give notice to the registrar, specifying the shares redenominated.
(2) The notice must—
(a) state the date on which the resolution was passed, and
(b) be accompanied by a statement of capital.
(3) The statement of capital must state with respect to the company’s share capital as redenominated by the resolution—
(a) the total number of shares of the company,
(b) the aggregate nominal value of those shares,
(c) for each class of shares—
(i) prescribed particulars of the rights attached to the shares,
(ii) the total number of shares of that class, and
(iii) the aggregate nominal value of shares of that class, and
(d) the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium).
(4) If default is made in complying with this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(5) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 131

Reduction of capital in connection with redenomination
‘(1) A company that passes a resolution redenominating some or all of its shares may, for the purpose of adjusting the nominal values of the redenominated shares to obtain values that are, in the opinion of the company, more suitable, reduce its share capital under this section.
(2) A reduction of capital under this section requires a special resolution of the company.
(3) Any such resolution must be passed within three months of the resolution effecting the redenomination.
(4) The amount by which a company’s share capital is reduced under this section must not exceed 10% of the nominal value of the company’s allotted share capital immediately after the reduction.
(5) A reduction of capital under this section does not extinguish or reduce any liability in respect of share capital not paid up.
(6) Nothing in Chapter (Reduction of share capital) of this Part applies to a reduction of capital under this section.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 132

Notice to registrar of reduction of capital in connection with redenomination
‘(1) A company that passes a resolution under section (Reduction of capital in connection with redenomination) (reduction of capital in connection with redenomination) must within 15 days after the resolution is passed give notice to the registrar stating—
(a) the date of the resolution, and
(b) the date of the resolution under section (Redenomination of share capital) in connection with which it was passed.
This is in addition to the copies of the resolutions themselves that are required to be delivered to the registrar under Chapter 3 of Part 3.
(2) The notice must be accompanied by a statement of capital.
(3) The statement of capital must state with respect to the company’s share capital as reduced by the resolution—
(a) the total number of shares of the company,
(b) the aggregate nominal value of those shares,
(c) for each class of shares—
(i) prescribed particulars of the rights attached to the shares,
(ii) the total number of shares of that class, and
(iii) the aggregate nominal value of shares of that class, and
(d) the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium).
(4) The registrar must register the notice and the statement on receipt.
(5) The reduction of capital is not effective until those documents are registered.
(6) The company must also deliver to the registrar, within 15 days after the resolution is passed, a statement by the directors confirming that the reduction in share capital is in accordance with section (Reduction of capital in connection with redenomination)(4) (reduction of capital not to exceed 10% of nominal value of allotted shares immediately after reduction).
(7) If default is made in complying with this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(8) A person guilty of an offence under this section is liable—
(a) on conviction on indictment to a fine, and
(b) on summary conviction to a fine not exceeding the statutory maximum.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 133

Redenomination reserve
‘(1) The amount by which a company’s share capital is reduced under section (Reduction of capital in connection with redenomination) (reduction of capital in connection with redenomination) must be transferred to a reserve, called “the redenomination reserve”.
(2) The redenomination reserve may be applied by the company in paying up shares to be allotted to members as fully paid bonus shares.
(3) Subject to that, the provisions of the Companies Acts relating to the reduction of a company’s share capital apply as if the redenomination reserve were paid-up share capital of the company.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 134

Classes of shares
‘(1) For the purpose of this Chapter shares are of one class if the rights attached to them are in all respects uniform.
(2) For this purpose the rights attached to shares are not regarded as different from those attached to other shares by reason only that they do not carry the same rights to dividends in the twelve months immediately following their allotment.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 135

Variation of class rights: companies having a share capital
‘(1) This section is concerned with the variation of the rights attached to a class of shares in a company having a share capital.
(2) Rights attached to a class of a company’s shares may be varied if, and only if, the holders of shares of that class consent to the variation in accordance with this section.
(3) This is without prejudice to any other restrictions on the variation of the rights.
(4) The consent required for the purposes of this section on the part of the holders of a class of a company’s shares is—
(a) consent in writing from the holders of at least three-quarters in nominal value of the issued shares of that class (excluding any shares held as treasury shares), or
(b) a special resolution passed at a separate general meeting of the holders of that class sanctioning the variation.
(5) Any amendment of a provision contained in a company’s articles for the variation of the rights attached to a class of shares, or the insertion of any such provision into the articles, is itself to be treated as a variation of those rights.
(6) In this section, and (except where the context otherwise requires) in any provision in a company’s articles for the variation of the rights attached to a class of shares, references to the variation of those rights include references to their abrogation.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 136

Variation of class rights: companies without a share capital
‘(1) This section is concerned with the variation of the rights of a class of members of a company where the company does not have a share capital.
(2) Rights of a class of members may be varied if, and only if, the members of that class consent to the variation in accordance with this section.
(3) This is without prejudice to any other restrictions on the variation of the rights.
(4) The consent required for the purposes of this section on the part of the members of a class is—
(a) consent in writing from at least three-quarters of the members of the class, or
(b) a special resolution passed at a separate general meeting of the members of that class sanctioning the variation.
(5) Any amendment of a provision contained in a company’s articles for the variation of the rights of a class of members, or the insertion of any such provision into the articles, is itself to be treated as a variation of those rights.
(6) In this section, and (except where the context otherwise requires) in any provision in a company’s articles for the variation of the rights of a class of members, references to the variation of those rights include references to their abrogation.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 137

Variation of class rights: saving for court’s powers under other provisions
‘Nothing in section (Variation of class rights: companies having a share capital) or (Variation of class rights: companies without a share capital) (variation of class rights) affects the power of the court under—
section 98 (application to cancel resolution for public company to be re-registered as private);
Part (Arrangements and reconstructions) (arrangements and reconstructions);
Part (Protection of members against unfair prejudice) (protection of members against unfair prejudice).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 138

Right to object to variation: companies having a share capital
‘(1) This section applies where the rights attached to any class of shares in a company are varied under section (Variation of class rights: companies having a share capital) (variation of class rights: companies having a share capital).
(2) The holders of not less in the aggregate than 15% of the issued shares of the class in question (being persons who did not consent to or vote in favour of the resolution for the variation) may apply to the court to have the variation cancelled.
For this purpose any of the company’s share capital held as treasury shares is disregarded.
(3) If such an application is made, the variation has no effect unless and until it is confirmed by the court.
(4) Application to the court—
(a) must be made within 21 days after the date on which the consent was given or the resolution was passed (as the case may be), and
(b) may be made on behalf of the shareholders entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.
(5) The court, after hearing the applicant and any other persons who apply to the court to be heard and appear to the court to be interested in the application, may, if satisfied having regard to all the circumstances of the case that the variation would unfairly prejudice the shareholders of the class represented by the applicant, disallow the variation, and shall if not satisfied confirm it.
The decision of the court on any such application is final.
(6) References in this section to the variation of the rights of holders of a class of shares include references to their abrogation.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 139

Right to object to variation: companies without a share capital
‘(1) This section applies where the rights of any class of members of a company are varied under section (Variation of class rights: companies without a share capital) (variation of class rights: companies without a share capital).
(2) Members amounting to not less than 15% of the members of the class in question (being persons who did not consent to or vote in favour of the resolution for the variation) may apply to the court to have the variation cancelled.
(3) If such an application is made, the variation has no effect unless and until it is confirmed by the court.
(4) Application to the court must be made within 21 days after the date on which the consent was given or the resolution was passed (as the case may be) and may be made on behalf of the members entitled to make the application by such one or more of their number as they may appoint in writing for the purpose.
(5) The court, after hearing the applicant and any other persons who apply to the court to be heard and appear to the court to be interested in the application, may, if satisfied having regard to all the circumstances of the case that the variation would unfairly prejudice the members of the class represented by the applicant, disallow the variation, and shall if not satisfied confirm it.
The decision of the court on any such application is final.
(6) References in this section to the variation of the rights of a class of members include references to their abrogation.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 140

Copy of court order to be forwarded to the registrar
‘(1) The company must within 15 days after the making of an order by the court on an application under section (Right to object to variation: companies having a share capital) or (Right to object to variation: companies without a share capital) (objection to variation of class rights) forward a copy of the order to the registrar.
(2) If default is made in complying with this section an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(3) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 141

Notice of name or other designation of class of shares
‘(1) Where a company assigns a name or other designation, or a new name or other designation, to any class of its shares, it must within one month from doing so deliver to the registrar a notice giving particulars of the name or designation so assigned.
(2) If default is made in complying with this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(3) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 142

Notice of particulars of variation of rights attached to shares
‘(1) Where the rights attached to any shares of a company are varied, the company must within one month from the date on which the variation is made deliver to the registrar a notice giving particulars of the variation.
(2) If default is made in complying with this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(3) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 143

Notice of new class of members
‘(1) If a company not having a share capital creates a new class of members, the company must within one month from the date on which the new class is created deliver to the registrar a notice containing particulars of the rights attached to that class.
(2) If default is made in complying with this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(3) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 144

Notice of name or other designation of class of members
‘(1) Where a company not having a share capital assigns a name or other designation, or a new name or other designation, to any class of its members, it must within one month from doing so deliver to the registrar a notice giving particulars of the name or designation so assigned.
(2) If default is made in complying with this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(3) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 145

Notice of particulars of variation of class rights
‘(1) If the rights of any class of members of a company not having a share capital are varied, the company must within one month from the date on which the variation is made deliver to the registrar a statement containing particulars of the variation.
(2) If default is made in complying with this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(3) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, read the First time and Second time, and added to the Bill.

New Clause 146

Circumstances in which a company may reduce its share capital
‘(1) A limited company having a share capital may reduce its share capital—
(a) in the case of a private company limited by shares, by special resolution supported by a solvency statement (see sections (Reduction of capital supported by solvency statement) to (Registration of resolution and supporting documents));
(b) in any case, by special resolution confirmed by the court (see sections (Application to court for order of confirmation) to (Expedited procedure for re-registration as a private company)).
(2) A company may not reduce its capital under subsection (1)(a) if as a result of the reduction there would no longer be any member of the company holding shares other than redeemable shares.
(3) Subject to that, a company may reduce its share capital under this section in any way.
(4) In particular, a company may—
(a) extinguish or reduce the liability on any of its shares in respect of share capital not paid up, or
(b) either with or without extinguishing or reducing liability on any of its shares—
(i) cancel any paid-up share capital that is lost or unrepresented by available assets, or
(ii) pay off any paid-up share capital in excess of the company’s wants.
(5) A special resolution under this section may not provide for a reduction of share capital to take effect later than the date on which the resolution has effect in accordance with this Chapter.
(6) This Chapter (apart from subsection (5) above) has effect subject to any provision of the company’s articles restricting or prohibiting the reduction of the company’s share capital.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 147

Reduction of capital supported by solvency statement
‘(1) A resolution for reducing share capital of a private company limited by shares is supported by a solvency statement if—
(a) the directors of the company make a statement of the solvency of the company in accordance with section (Solvency statement) (a “solvency statement”) not more than 15 days before the date on which the resolution is passed, and
(b) the resolution and solvency statement are registered in accordance with section (Registration of resolution and supporting documents).
(2) Where the resolution is proposed as a written resolution, a copy of the solvency statement must be sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him.
(3) Where the resolution is proposed at a general meeting, a copy of the solvency statement must be made available for inspection by members of the company throughout that meeting.
(4) The validity of a resolution is not affected by a failure to comply with subsection (2) or (3).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 148

Solvency statement
‘(1) A solvency statement is a statement that each of the directors—
(a) has formed the opinion, as regards the company’s situation at the date of the statement, that there is no ground on which the company could then be found to be unable to pay (or otherwise discharge) its debts; and
(b) has also formed the opinion—
(i) if it is intended to commence the winding up of the company within twelve months of that date, that the company will be able to pay (or otherwise discharge) its debts in full within twelve months of the commencement of the winding up; or
(ii) in any other case, that the company will be able to pay (or otherwise discharge) its debts as they fall due during the year immediately following that date.
(2) In forming those opinions, the directors must take into account all of the company’s liabilities (including any contingent or prospective liabilities).
(3) The solvency statement must be in the prescribed form and must state—
(a) the date on which it is made, and
(b) the name of each director of the company.
(4) If the directors make a solvency statement without having reasonable grounds for the opinions expressed in it, and the statement is delivered to the registrar, an offence is committed by every director who is in default.
(5) A person guilty of an offence under subsection (4) is liable—
(a) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both);
(b) on summary conviction—
(i) in England and Wales, to imprisonment for a term not exceeding twelve months or to a fine not exceeding the statutory maximum (or both);
(ii) in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months, or to a fine not exceeding the statutory maximum (or both).’.—[Margaret Hodge.]

Brought up, and added to the Bill..

New Clause 149

Registration of resolution and supporting documents
‘(1) Within 15 days after the resolution for reducing share capital is passed the company must deliver to the registrar—
(a) a copy of the solvency statement, and
(b) a statement of capital.
This is in addition to the copy of the resolution itself that is required to be delivered to the registrar under Chapter 3 of Part 3.
(2) The statement of capital must state with respect to the company’s share capital as reduced by the resolution—
(a) the total number of shares of the company,
(b) the aggregate nominal value of those shares,
(c) for each class of shares—
(i) prescribed particulars of the rights attached to the shares,
(ii) the total number of shares of that class, and
(iii) the aggregate nominal value of shares of that class, and
(d) the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium).
(3) The registrar must register the documents delivered to him under subsection (1) on receipt.
(4) The resolution does not take effect until those documents are registered.
(5) The company must also deliver to the registrar, within 15 days after the resolution is passed, a statement by the directors confirming that the solvency statement was—
(a) made not more than 15 days before the date on which the resolution was passed, and
(b) provided to members in accordance with section (Reduction of capital supported by solvency statement)(2) or (3).
(6) The validity of a resolution is not affected by—
(a) a failure to deliver the documents required to be delivered to the registrar under subsection (1) within the time specified in that subsection, or
(b) a failure to comply with subsection (5).
(7) If the company delivers to the registrar a solvency statement that was not provided to members in accordance with section (Reduction of capital supported by solvency statement)(2) or (3), an offence is committed by every officer of the company who is in default.
(8) If default is made in complying with this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(9) A person guilty of an offence under subsection (7) or (8) is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 150

Application to court for order of confirmation
‘(1) Where a company has passed a resolution for reducing share capital, it may apply to the court for an order confirming the reduction.
(2) If the proposed reduction of capital involves either—
(a) diminution of liability in respect of unpaid share capital, or
(b) the payment to a shareholder of any paid-up share capital,
section (Creditors entitled to object to reduction) applies (creditors entitled to object to reduction) unless the court directs otherwise.
(3) The court may, if having regard to any special circumstances of the case it thinks proper to do so, direct that section (Creditors entitled to object to reduction) is not to apply as regards any class or classes of creditors.
(4) The court may direct that section (Creditors entitled to object to reduction) is to apply in any other case.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 151

Creditors entitled to object to reduction
‘(1) Where this section applies (see section (Application to court for order of confirmation)(2) and (4)), every creditor of the company who at the date fixed by the court is entitled to any debt or claim that, if that date were the commencement of the winding up of the company would be admissible in proof against the company, is entitled to object to the reduction of capital.
(2) The court shall settle a list of creditors entitled to object.
(3) For that purpose the court—
(a) shall ascertain, as far as possible without requiring an application from any creditor, the names of those creditors and the nature and amount of their debts or claims, and
(b) may publish notices fixing a day or days within which creditors not entered on the list are to claim to be so entered or are to be excluded from the right of objecting to the reduction of capital.
(4) If a creditor entered on the list whose debt or claim is not discharged or has not determined does not consent to the reduction, the court may, if it thinks fit, dispense with the consent of that creditor on the company securing payment of his debt or claim.
(5) For this purpose the debt or claim must be secured by appropriating (as the court may direct) the following amount—
(a) if the company admits the full amount of the debt or claim or, though not admitting it, is willing to provide for it, the full amount of the debt or claim;
(b) if the company does not admit, and is not willing to provide for, the full amount of the debt or claim, or if the amount is contingent or not ascertained, an amount fixed by the court after the like enquiry and adjudication as if the company were being wound up by the court.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 152

Offences in connection with list of creditors
‘(1) If an officer of the company—
(a) intentionally or recklessly—
(i) conceals the name of a creditor entitled to object to the reduction of capital, or
(ii) misrepresents the nature or amount of the debt or claim of a creditor, or
(b) is knowingly concerned in any such concealment or misrepresentation,
he commits an offence.
(2) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 153

Court order confirming reduction
‘(1) The court may make an order confirming the reduction of capital on such terms and conditions as it thinks fit.
(2) The court must not confirm the reduction unless it is satisfied, with respect to every creditor of the company who is entitled to object to the reduction of capital that either—
(a) his consent to the reduction has been obtained, or
(b) his debt or claim has been discharged, or has determined or has been secured.
(3) Where the court confirms the reduction, it may order the company to publish (as the court directs) the reasons for reduction of capital, or such other information in regard to it as the court thinks expedient with a view to giving proper information to the public, and (if the court thinks fit) the causes that led to the reduction.
(4) The court may, if for any special reason it thinks proper to do so, make an order directing that the company must, during such period (commencing on or at any time after the date of the order) as is specified in the order, add to its name as its last words the words “and reduced”.
If such an order is made, those words are, until the end of the period specified in the order, deemed to be part of the company’s name.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 154

Registration of order and statement of capital
‘(1) The registrar, on production of an order of the court confirming the reduction of a company’s share capital and the delivery of a copy of the order and of a statement of capital (approved by the court), shall register the order and statement.
This is subject to section (Public company reducing capital below authorised minimum) (public company reducing capital below authorised minimum).
(2) The statement of capital must state with respect to the company’s share capital as altered by the order—
(a) the total number of shares of the company,
(b) the aggregate nominal value of those shares,
(c) for each class of shares—
(i) prescribed particulars of the rights attached to the shares,
(ii) the total number of shares of that class, and
(iii) the aggregate nominal value of shares of that class, and
(d) the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium).
(3) The resolution for reducing share capital, as confirmed by the court’s order, takes effect—
(a) in the case of a reduction of share capital that forms part of a compromise or arrangement sanctioned by the court under Part (Arrangements and reconstructions) (arrangements and reconstructions)—
(i) on delivery of the order and statement of capital to the registrar, or
(ii) if the court so orders, on the registration of the order and statement of capital;
(b) in any other case, on the registration of the order and statement of capital.
(4) Notice of the registration of the order and statement of capital must be published in such manner as the court may direct.
(5) The registrar must certify the registration of the order and statement of capital.
(6) The certificate—
(a) must be signed by the registrar or authenticated by the registrar’s official seal, and
(b) is conclusive evidence—
(i) that the requirements of this Act with respect to the reduction of share capital have been complied with, and
(ii) that the company’s share capital is as stated in the statement of capital.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 155

Public company reducing capital below authorised minimum
‘(1) This section applies where the court makes an order confirming a reduction of a public company’s capital that has the effect of bringing the nominal value of its allotted share capital below the authorised minimum (see section 538).
(2) The registrar must not register the order unless either—
(a) the court so directs, or
(b) the company is first re-registered as a private company.
(3) Section (Expedited procedure for re-registration as a private company) provides an expedited procedure for re-registration in these circumstances.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 156

Expedited procedure for re-registration as a private company
‘(1) The court may authorise the company to be re-registered as a private company without its having passed the special resolution required by section 97.
(2) If it does so, the court must specify in the order the changes to the company’s name and articles to be made in connection with the re-registration.
(3) The company may then be re-registered as a private company if an application to that effect is delivered to the registrar together with—
(a) a copy of the court’s order, and
(b) notice of the company’s name, and a copy of the company’s articles, as altered by the court’s order.
(4) On receipt of such an application the registrar must issue a certificate of incorporation altered to meet the circumstances of the case.
(5) The certificate must state that it is issued on re-registration and the date on which it is issued.
(6) On the issue of the certificate—
(a) the company by virtue of the issue of the certificate becomes a private company, and
(b) the changes in the company’s name and articles take effect.
(7) The certificate is conclusive evidence that the requirements of this Act as to re-registration have been complied with.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 157

Liability of members following reduction of capital
‘(1) Where a company’s share capital is reduced a member of the company (past or present) is not liable in respect of any share to any call or contribution exceeding in amount the difference (if any) between—
(a) the nominal amount of the share as notified to the registrar in the statement of capital delivered under section (Registration of resolution and supporting documents) or (Registration of order and statement of capital), and
(b) the amount paid on the share or the reduced amount (if any) which is deemed to have been paid on it, as the case may be.
(2) This is subject to section (Liability to creditor in case of omission from list of creditors) (liability to creditor in case of omission from list).
(3) Nothing in this section affects the rights of the contributories among themselves.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 158

Liability to creditor in case of omission from list of creditors
‘(1) This section applies where, in the case of a reduction of capital confirmed by the court—
(a) a creditor entitled to object to the reduction of share capital is by reason of his ignorance—
(i) of the proceedings for reduction of share capital, or
(ii) of their nature and effect with respect to his debt or claim,
not entered on the list of creditors, and
(b) after the reduction of capital the company is unable to pay the amount of his debt or claim.
(2) Every person who was a member of the company at the date on which the resolution for reducing capital took effect under section (Registration of order and statement of capital)(3) is liable to contribute for the payment of the debt or claim an amount not exceeding that which he would have been liable to contribute if the company had commenced to be wound up on the day before that date.
(3) If the company is wound up, the court on the application of the creditor in question, and proof of ignorance as mentioned in subsection (1)(a), may (if it thinks fit)—
(a) settle accordingly a list of persons liable to contribute under this section, and
(b) make and enforce calls and orders on them as if they were ordinary contributories in a winding up.
(4) The reference in subsection (1)(b) to a company being unable to pay the amount of a debt or claim has the same meaning as in section 123 of the Insolvency Act 1986 (c. 45) or Article 103 of the Insolvency (Northern Ireland) Order 1989 (S.I.1989/2405(N.I.19)).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 159

Shares no bar to damages against company
‘A person is not debarred from obtaining damages or other compensation from a company by reason only of his holding or having held shares in the company or any right to apply or subscribe for shares or to be included in the company’s register of members in respect of shares.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 160

Public companies: duty of directors to call meeting on serious loss of capital
‘(1) Where the net assets of a public company are half or less of its called-up share capital, the directors must call a general meeting of the company to consider whether any, and if so what, steps should be taken to deal with the situation.
(2) They must do so not later than 28 days from the earliest day on which that fact is known to a director of the company.
(3) The meeting must be convened for a date not later than 56 days from that day.
(4) If there is a failure to convene a meeting as required by this section, each of the directors of the company who—
(a) knowingly authorises or permits the failure, or
(b) after the period during which the meeting should have been convened, knowingly authorises or permits the failure to continue,
commits an offence.
(5) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.
(6) Nothing in this section authorises the consideration at a meeting convened in pursuance of subsection (1) of any matter that could not have been considered at that meeting apart from this section.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 161

General power to make further provision by regulations
‘(1) The Secretary of State may by regulations modify the following provisions of this Part—
Sections (General prohibition of commissions, discounts and allowances) and (Permitted commission),
Chapter (Payment for shares) (payment for shares),
Chapter (Public companies: independent valuation of non-cash consideration) (public companies: independent valuation of non-cash consideration),
Chapter (Share premiums) (share premiums),
sections (Redenomination of share capital) to (Redenomination reserve) (redenomination of share capital),
Chapter (Reduction of share capital) (reduction of capital), and
section (Public companies: duty of directors to call meeting on serious loss of capital) (public companies: duty of directors to call meeting on serious loss of capital).
(2) The regulations may—
(a) amend or repeal any of those provisions, or
(b) make such other provision as appears to the Secretary of State appropriate in place of any of those provisions.
(3) Regulations under this section may make consequential amendments or repeals in other provisions of this Act, or in other enactments.
(4) Regulations under this section are subject to affirmative resolution procedure.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 162

General rule against limited company acquiring its own shares
‘(1) A limited company must not acquire its own shares, whether by purchase, subscription or otherwise, except in accordance with the provisions of this Part.
(2) If a company purports to act in contravention of this section—
(a) an offence is committed by—
(i) the company, and
(ii) every officer of the company who is in default, and
(b) the purported acquisition is void.
(3) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both);
(b) on summary conviction—
(i) in England and Wales, to imprisonment for a term not exceeding twelve months or a fine not exceeding the statutory maximum (or both);
(ii) in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum (or both).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 163

Exceptions to general rule
‘(1) A limited company may acquire any of its own fully paid shares otherwise than for valuable consideration.
(2) Section (General rule against limited company acquiring its own shares) does not prohibit—
(a) the acquisition of shares in a reduction of capital duly made;
(b) the purchase of shares in pursuance of an order of the court under—
(i) section 98 (application to court to cancel resolution for re-registration as a private company),
(ii) section (Application to court to cancel resolution)(6) (powers of court on objection to redemption or purchase of shares out of capital),
(iii) section 534 (remedial order in case of breach of prohibition of public offers by private company), or
(iv) Part (Protection of members against unfair prejudice) (protection of members against unfair prejudice);
(c) the forfeiture of shares, or the acceptance of shares surrendered in lieu, in pursuance of the company’s articles, for failure to pay any sum payable in respect of the shares.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 164

Treatment of shares held by nominee
‘(1) This section applies where shares in a limited company—
(a) are taken by a subscriber to the memorandum as nominee of the company,
(b) are issued to a nominee of the company, or
(c) are acquired by a nominee of the company, partly paid up, from a third person.
(2) For all purposes—
(a) the shares are to be treated as held by the nominee on his own account, and
(b) the company is to be regarded as having no beneficial interest in them.
(3) This section does not apply—
(a) to shares acquired otherwise than by subscription by a nominee of the public company, where—
(i) a person acquires shares in the company with financial assistance given to him, directly or indirectly, by the company for the purpose of or in connection with the acquisition, and
(ii) the company has a beneficial interest in the shares;
(b) to shares acquired by a nominee of the company when the company has no beneficial interest in the shares.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 165

Liability of others where nominee fails to make payment in respect of shares
‘(1) This section applies where shares in a limited company—
(a) are taken by a subscriber to the memorandum as nominee of the company,
(b) are issued to a nominee of the company, or
(c) are acquired by a nominee of the company, partly paid up, from a third person.
(2) If the nominee, having been called on to pay any amount for the purposes of paying up, or paying any premium on, the shares, fails to pay that amount within 21 days from being called on to do so, then—
(a) in the case of shares that he agreed to take as subscriber to the memorandum, the other subscribers to the memorandum, and
(b) in any other case, the directors of the company when the shares were issued to or acquired by him,
are jointly and severally liable with him to pay that amount.
(3) If in proceedings for the recovery of an amount under subsection (3) it appears to the court that the subscriber or director—
(a) has acted honestly and reasonably, and
(b) having regard to all the circumstances of the case, ought fairly to be relieved from liability,
the court may relieve him, either wholly or in part, from his liability on such terms as the court thinks fit.
(4) If a subscriber to a company’s memorandum or a director of a company has reason to apprehend that a claim will or might be made for the recovery of any such amount from him—
(a) he may apply to the court for relief, and
(b) the court has the same power to relieve him as it would have had in proceedings for recovery of that amount.
(5) This section does not apply to shares acquired by a nominee of the company when the company has no beneficial interest in the shares.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 166

Duty to cancel shares in public company held by or for the company
‘(1) This section applies in the case of a public company—
(a) where shares in the company are forfeited, or surrendered to the company in lieu of forfeiture, in pursuance of the articles, for failure to pay any sum payable in respect of the shares;
(b) where shares in the company are surrendered to the company in pursuance of section 102C(1)(b) of the Building Societies Act 1986 (c. 53);
(c) where shares in the company are acquired by it (otherwise than in accordance with this Part) and the company has a beneficial interest in the shares;
(d) where a nominee of the company acquires shares in the company from a third party without financial assistance being given directly or indirectly by the company and the company has a beneficial interest in the shares; or
(e) where a person acquires shares in the company, with financial assistance given to him, directly or indirectly, by the company for the purpose of or in connection with the acquisition, and the company has a beneficial interest in the shares.
(2) Unless the shares or any interest of the company in them are previously disposed of, the company must—
(a) cancel the shares and diminish the amount of the company’s share capital by the nominal value of the shares cancelled, and
(b) where the effect is that the nominal value of the company’s allotted share capital is brought below the authorised minimum (see section 538), apply for re-registration as a private company, stating the effect of the cancellation.
(3) It must do so no later than—
(a) in a case within subsection (1)(a) or (b), three years from the date of the forfeiture or surrender;
(b) in a case within subsection (1)(c) or (d), three years from the date of the acquisition;
(c) in a case within subsection (1)(e), one year from the date of the acquisition.
(4) The directors of the company may take any steps necessary to enable the company to comply with this section, and may do so without complying with the provisions of Chapter (Reduction of capital) of Part (A company’s share capital).
See also section (Re-registration as private company in consequence of cancellation) (re-registration as private company in consequence of cancellation).
(5) Neither the company nor, in a case within subsection (1)(d) or (e), the nominee or other shareholder may exercise any voting rights in respect of the shares.
(6) Any purported exercise of those rights is void.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 167

Notice of cancellation of shares
‘(1) Where a company cancels shares in order to comply with section (Duty to cancel shares in public company held by or for the company), it must within one month after the shares are cancelled give notice to the registrar, specifying the shares cancelled.
(2) The notice must be accompanied by a statement of capital.
(3) The statement of capital must state with respect to the company’s share capital immediately following the cancellation—
(a) the total number of shares of the company,
(b) the aggregate nominal value of those shares,
(c) for each class of shares—
(i) prescribed particulars of the rights attached to the shares,
(ii) the total number of shares of that class, and
(iii) the aggregate nominal value of shares of that class, and
(d) the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium).
(4) If default is made in complying with this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(5) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 168

Re-registration as private company in consequence of cancellation
‘(1) Where a company is obliged to re-register as a private company to comply with section (Duty to cancel shares in public company held by or for the company), the directors may resolve that the company should be so re-registered.
Any such resolution is subject to Chapter 3 of Part 3 (resolutions affecting company’s constitution: copy to be forwarded to the registrar, etc).
(2) The resolution may make such changes—
(a) in the company’s name, and
(b) in the company’s articles,
as are necessary in connection with its becoming a private company.
(3) The application for re-registration must contain a statement of the company’s proposed name on re-registration.
(4) The application must be accompanied by—
(a) a copy of the resolution (unless a copy has already been forwarded under Chapter 3 of Part 3),
(b) a copy of the company’s articles as amended by the resolution, and
(c) a statement of compliance.
(5) The statement of compliance required is a statement that the requirements of this section as to re-registration as a private company have been complied with.
(6) The registrar may accept the statement of compliance as sufficient evidence that the company is entitled to be re-registered as a private company.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 169

Issue of certificate of incorporation on re-registration
‘(1) If on an application under section (Re-registration as private company in consequence of cancellation) the registrar is satisfied that the company is entitled to be re-registered as a private company, the company shall be re-registered accordingly.
(2) The registrar must issue a certificate of incorporation altered to meet the circumstances of the case.
(3) The certificate must state that it is issued on re-registration and the date on which it is issued.
(4) On the issue of the certificate—
(a) the company by virtue of the issue of the certificate becomes a private company, and
(b) the changes in the company’s name and articles take effect.
(5) The certificate is conclusive evidence that the requirements of this Act as to re-registration have been complied with.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 170

Effect of failure to register
‘(1) If a public company that is required by section (Duty to cancel shares in public company held by or for the company) to apply to be re-registered as a private company fails to do so before the end of the period specified in subsection (3) of that section, Chapter 1 of Part 17 (prohibition of public offers by private company) applies to it as if it were a private company.
(2) Subject to that, the company continues to be treated as a public company until it is so registered.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 171

Offence in case of failure to cancel shares or re-register
‘(1) This section applies where a company, when required to do by section (Duty to cancel shares in public company held by or for the company)—
(a) fails to cancel any shares, or
(b) fails to make an application for re-registration as a private company,
within the time specified in subsection (3) of that section.
(2) An offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(3) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 172

Application of provisions to company re-registering as public company
‘(1) This section applies where, after shares in a private company—
(a) are forfeited in pursuance of the company’s articles or are surrendered to the company in lieu of forfeiture,
(b) are acquired by the company (otherwise than by any of the methods permitted by this Part), the company having a beneficial interest in the shares,
(c) are acquired by a nominee of the company from a third party without financial assistance being given directly or indirectly by the company, the company having a beneficial interest in the shares, or
(d) are acquired by a person with financial assistance given to him, directly or indirectly, by the company for the purpose of or in connection with the acquisition, the company having a beneficial interest in the shares,
the company is re-registered as a public company.
(2) In that case the provisions of sections (Duty to cancel shares in public company held by or for the company) to (Offence in case of failure to cancel shares or re-register) apply to the company as if it had been a public company at the time of the forfeiture, surrender or acquisition, subject to the following modification.
(3) The modification is that the period specified in section (Duty to cancel shares in public company held by or for the company)(3)(a), (b) or (c) (period for complying with obligations under that section) runs from the date of the re-registration of the company as a public company.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 173

Accounting treatment of shares held by public company or nominee
‘(1) Where—
(a) a public company, or a nominee of a public company, acquires shares in the company, and
(b) those shares are shown in a balance sheet of the company as an asset,
an amount equal to the value of the shares must be transferred out of profits available for dividend to a reserve fund and is not then available for distribution.
(2) Subsection (1) applies to an interest in shares as it applies to shares.
As it so applies the reference to the value of the shares shall be read as a reference to the value to the company of its interest in the shares.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 174

Public companies: general rule against lien or charge on own shares
‘(1) A lien or other charge of a public company on its own shares (whether taken expressly or otherwise) is void, except as permitted by this section.
(2) In the case of any description of company, a charge is permitted if the shares are not fully paid up and the charge is for an amount payable in respect of the shares.
(3) In the case of a company whose ordinary business—
(a) includes the lending of money, or
(b) consists of the provision of credit or the bailment (in Scotland, hiring) of goods under a hire purchase agreement, or both,
a charge is permitted (whether the shares are fully paid or not) if it arises in connection with a transaction entered into by the company in the ordinary course of that business.
(4) In the case of a company that has been re-registered as a public company, a charge is permitted if it was in existence immediately before the application for re-registration.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 175

Interests to be disregarded in determining whether company has beneficial interest
‘In determining for the purposes of this Chapter whether a company has a beneficial interest in shares, there shall be disregarded any such interest as is mentioned in—
section (Residual interest under pension scheme or employees’ share scheme) (residual interest under pension scheme or employees’ share scheme),
section (Employer’s charges and other rights of recovery) (employer’s charges and other rights of recovery) or
section (Rights as personal representative or trustee) (rights as personal representative or trustee).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 176

Residual interest under pension scheme or employees’ share scheme
‘(1) Where the shares are held on trust for the purposes of a pension scheme or employees’ share scheme, there shall be disregarded any residual interest of the company that has not vested in possession.
(2) A “residual interest” means a right of the company to receive any of the trust property in the event of—
(a) all the liabilities arising under the scheme having been satisfied or provided for, or
(b) the company ceasing to participate in the scheme, or
(c) the trust property at any time exceeding what is necessary for satisfying the liabilities arising or expected to arise under the scheme.
(3) In subsection (2)—
(a) the reference to a right includes a right dependent on the exercise of a discretion vested by the scheme in the trustee or another person, and
(b) the reference to liabilities arising under a scheme includes liabilities that have resulted, or may result, from the exercise of any such discretion.
(4) For the purposes of this section a residual interest vests in possession—
(a) in a case within subsection (2)(a), on the occurrence of the event mentioned there (whether or not the amount of the property receivable pursuant to the right is ascertained);
(b) in a case within subsection (2)(b) or (c), when the company becomes entitled to require the trustee to transfer to it any of the property receivable pursuant to that right.
(5) Where by virtue of this section shares are exempt from section (Treatment of shares held by nominee) or (Liability of others where nominee fails to make payment in respect of shares) (shares held by company’s nominee) at the time they are taken, issued or acquired but the residual interest in question vests in possession before they are disposed of or fully paid up, those sections apply to the shares as if they had been taken, issued or acquired on the date on which that interest vests in possession.
(6) Where by virtue of this section shares are exempt from sections (Duty to cancel shares in public company held by or for the company) to (Application of provisions to company re-registering as public company) (shares held by or for public company) at the time they are acquired but the residual interest in question vests in possession before they are disposed of, those sections apply to the shares as if they had been acquired on the date on which the interest vests in possession.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 177

Employer’s charges and other rights of recovery
‘(1) Where the shares are held on trust for the purposes of a pension scheme there shall be disregarded—
(a) any charge or lien on, or set-off against, any benefit or other right or interest under the scheme for the purpose of enabling the employer or former employer of a member of the scheme to obtain the discharge of a monetary obligation due to him from the member;
(b) any right to receive from the trustee of the scheme, or as trustee of the scheme to retain, an amount that can be recovered or retained under section 61 of the Pension Schemes Act 1993 (c. 48) or section 57 of the Pension Schemes (Northern Ireland) Act 1993 (deduction of contributions equivalent premium from refund of scheme contributions), or otherwise, as reimbursement or partial reimbursement for any contributions equivalent premium paid in connection with the scheme under Part 3 of that Act.
(2) Where the shares are held on trust for the purposes of an employees’ share scheme, there shall be disregarded any charge or lien on, or set-off against, any benefit or other right or interest under the scheme for the purpose of enabling the employer or former employer of a member of the scheme to obtain the discharge of a monetary obligation due to him from the member.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 178

Rights as personal representative or trustee
‘Where the company is a personal representative or trustee, there shall be disregarded any rights that the company has in that capacity including, in particular—
(a) any right to recover its expenses or be remunerated out of the estate or trust property, and
(b) any right to be indemnified out of that property for any liability incurred by reason of any act or omission of the company in the performance of its duties as personal representative or trustee.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 179

Meaning of “pension scheme”
‘(1) In this Chapter “pension scheme” means a scheme for the provision of benefits consisting of or including relevant benefits for or in respect of employees or former employees.
(2) In subsection (1) “relevant benefits” means any pension, lump sum, gratuity or other like benefit given or to be given on retirement or on death or in anticipation of retirement or, in connection with past service, after retirement or death.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 180

Application of provisions to directors
‘For the purposes of this Chapter references to “employer” and “employee”, in the context of a pension scheme or employees’ share scheme, shall be read as if a director of a company were employed by it.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 181

Meaning of “financial assistance”
‘(1) In this Chapter “financial assistance” means—
(a) financial assistance given by way of gift,
(b) financial assistance given—
(i) by way of guarantee, security or indemnity (other than an indemnity in respect of the indemnifier’s own neglect or default), or
(ii) by way of release or waiver,
(c) financial assistance given—
(i) by way of a loan or any other agreement under which any of the obligations of the person giving the assistance are to be fulfilled at a time when in accordance with the agreement any obligation of another party to the agreement remains unfulfilled, or
(ii) by way of the novation of, or the assignment (in Scotland, assignation) of rights arising under, a loan or such other agreement, or
(d) any other financial assistance given by a company where—
(i) the net assets of the company are reduced to a material extent by the giving of the assistance, or
(ii) the company has no net assets.
(2) “Net assets” here means the aggregate amount of the company’s assets less the aggregate amount of its liabilities.
(3) For this purpose a company’s liabilities include—
(a) where the company draws up Companies Act individual accounts, any provision of a kind specified for the purposes of this subsection by regulations under section 378, and
(b) where the company draws up IAS individual accounts, any provision made in those accounts.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 182

Assistance for acquisition of shares in public company
‘(1) Where a person is acquiring or proposing to acquire shares in a public company, it is not lawful for the company or any of its subsidiaries to give financial assistance directly or indirectly for the purpose of the acquisition before or at the same time as the acquisition takes place.
(2) Subsection (1) does not prohibit a company from giving financial assistance for the acquisition of shares in it or its holding company if—
(a) the company’s principal purpose in giving the assistance is not to give it for the purpose of any such acquisition, or
(b) the giving of the assistance for that purpose is only an incidental part of some larger purpose of the company,
and the assistance is given in good faith in the interests of the company.
(3) Where—
(a) a person has acquired shares in a company, and
(b) a liability has been incurred (by that or another person) for the purpose of the acquisition,
it is not lawful for the company or any of its subsidiaries to give financial assistance directly or indirectly for the purpose of reducing or discharging the liability if, at the time the assistance is given, the company is a public company.
(4) Subsection (3) does not prohibit a company from giving financial assistance if—
(a) the company’s principal purpose in giving the assistance is not to reduce or discharge any liability incurred by a person for the purpose of the acquisition of shares in the company or its holding company, or
(b) the reduction or discharge of any such liability is only an incidental part of some larger purpose of the company,
and the assistance is given in good faith in the interests of the company.
(5) This section has effect subject to sections (Unconditional exceptions) and (Conditional exceptions) (unconditional and conditional exceptions to prohibition).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 183

Assistance by public company for acquisition of shares in its private holding company
‘(1) Where a person is acquiring or proposing to acquire shares in a private company, it is not lawful for a public company that is a subsidiary of that company to give financial assistance directly or indirectly for the purpose of the acquisition before or at the same time as the acquisition takes place.
(2) Subsection (1) does not prohibit a company from giving financial assistance for the acquisition of shares in its holding company if—
(a) the company’s principal purpose in giving the assistance is not to give it for the purpose of any such acquisition, or
(b) the giving of the assistance for that purpose is only an incidental part of some larger purpose of the company,
and the assistance is given in good faith in the interests of the company.
(3) Where—
(a) a person has acquired shares in a private company, and
(b) a liability has been incurred (by that or another person) for the purpose of the acquisition,
it is not lawful for a public company that is a subsidiary of that company to give financial assistance directly or indirectly for the purpose of reducing or discharging the liability.
(4) Subsection (3) does not prohibit a company from giving financial assistance if—
(a) the company’s principal purpose in giving the assistance is not to reduce or discharge any liability incurred by a person for the purpose of the acquisition of shares in its holding company, or
(b) the reduction or discharge of any such liability is only an incidental part of some larger purpose of the company,
and the assistance is given in good faith in the interests of the company.
(5) This section has effect subject to sections (Unconditional exceptions) and (Conditional exceptions) (unconditional and conditional exceptions to prohibition).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 184

Prohibited financial assistance an offence
‘(1) If a company contravenes section (Assistance for acquisition of shares in public company)(1) or (3) or section (Assistance by public company for acquisition of shares in its private holding company)(1) or (3) (prohibited financial assistance) an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(2) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both);
(b) on summary conviction—
(i) in England and Wales, to imprisonment for a term not exceeding twelve months or to a fine not exceeding the statutory maximum (or both);
(ii) in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months, or to a fine not exceeding the statutory maximum (or both).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 185

Unconditional exceptions
‘(1) Neither section (Assistance for acquisition of shares in public company) nor section (Assistance by public company for acquisition of shares in its private holding company) prohibits a transaction to which this section applies.
(2) Those transactions are—
(a) a distribution of the company’s assets by way of—
(i) dividend lawfully made, or
(ii) distribution in the course of a company’s winding up;
(b) an allotment of bonus shares;
(c) a reduction of capital under Chapter (Reduction of capital) of Part (A company’s share capital);
(d) a redemption of shares under Chapter (Redeemable shares) or a purchase of shares under Chapter (Purchase of own shares) of this Part;
(e) anything done in pursuance of an order of the court under Part (Arrangements and reconstructions) (order sanctioning compromise or arrangement with members or creditors);
(f) any thing done under an arrangement made in pursuance of section 110 of the Insolvency Act 1986 (c. 45) or Article 96 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)) (liquidator in winding up accepting shares as consideration for sale of company’s property);
(g) anything done under an arrangement made between a company and its creditors that is binding on the creditors by virtue of Part 1 of the Insolvency Act 1986 (c.45) or Part 2 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 186

Conditional exceptions
‘(1) Neither section (Assistance for acquisition of shares in public company) nor section (Assistance by public company for acquisition of shares in its private holding company) prohibits a transaction to which this section applies—
(a) in the case of a private company, or
(b) in the case of a public company if—
(i) the company has net assets that are not reduced by the giving of the assistance, or
(ii) to the extent that those assets are so reduced, the assistance is provided out of distributable profits.
(2) The transactions to which this section applies are—
(a) the lending of money in the ordinary course of the company’s business;
(b) the provision by the company, in good faith in the interests of the company, of financial assistance for the purposes of an employees’share scheme;
(c) the provision of financial assistance by a company or any of its subsidiaries for the purposes of or in connection with anything done by the company, or a company in the same group, for the purpose of enabling or facilitating transactions in shares in the first-mentioned company between, and involving the acquisition of beneficial ownership of those share by—
(i) bona fide employees or former employees of that company or of another company in the same group, or
(ii) spouses or civil partners, widows, widowers or surviving civil partners, or minor children or step-children of any such employees or former employees;
(d) the making by a company of loans to persons (other than directors) employed in good faith by the company with a view to enabling those persons to acquire fully paid shares in the company or its holding company to be held by them by way of beneficial ownership.
(3) The references in this section to “net assets” are to the amount by which the aggregate of the company’s assets exceeds the aggregate of its liabilities.
(4) For this purpose—
(a) the amount of both assets and liabilities shall be taken to be as stated in the company’s accounting records immediately before the financial assistance is given, and
(b) “liabilities” includes any amount retained as reasonably necessary for the purpose of providing for a liability the nature of which is clearly defined and that is either likely to be incurred or certain to be incurred but uncertain as to amount or as to the date on which it will arise.
(5) For the purposes of subsection (2)(c) a company is in the same group as another company if it is a holding company or subsidiary of that company or a subsidiary of a holding company of that company.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 187

Definitions for this Chapter
‘(1) In this Chapter—
“distributable profits”, in relation to the giving of any financial assistance—
(g) means those profits out of which the company could lawfully make a distribution equal in value to that assistance, and
(h) includes, in a case where the financial assistance consists of or includes, or is treated as arising in consequence of, the sale, transfer or other disposition of a non-cash asset, any profit that, if the company were to make a distribution of that character would be available for that purpose in accordance with section (Distributions in kind: determination of amount); and
“distribution” has the same meaning as in Part (Distributions) (distributions) (see section (Meaning of “distribution”)).
(2) In this Chapter—
(a) a reference to a person incurring a liability includes his changing his financial position by making an agreement or arrangement (whether enforceable or unenforceable, and whether made on his own account or with any other person) or by any other means, and
(b) a reference to a company giving financial assistance for the purposes of reducing or discharging a liability incurred by a person for the purpose of the acquisition of shares includes its giving such assistance for the purpose of wholly or partly restoring his financial position to what it was before the acquisition took place.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 188

Power of limited company to issue redeemable shares
‘(1) A limited company having a share capital may issue shares that are to be redeemed or are liable to be redeemed at the option of the company or the shareholder (“redeemable shares”), subject to the following provisions.
(2) The articles of a private limited company may exclude or restrict the issue of redeemable shares.
(3) A public limited company may only issue redeemable shares if it is authorised to do so by its articles.
(4) No redeemable shares may be issued at a time when there are no issued shares of the company that are not redeemable.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 189

Terms and manner of redemption
‘(1) The directors of a limited company may determine the terms, conditions and manner of redemption of shares if they are authorised to do so—
(a) by the company’s articles, or
(b) by a resolution of the company.
(2) A resolution under subsection (1)(b) may be an ordinary resolution, even though it amends the company’s articles.
(3) Where the directors are authorised under subsection (1) to determine the terms, conditions and manner of redemption of shares—
(a) they must do so before the shares are allotted, and
(b) any obligation of the company to state in a statement of capital the rights attached to the shares extends to the terms, conditions and manner of redemption.
(4) Where the directors are not so authorised, the terms, conditions and manner of redemption of any redeemable shares must be stated in the company’s articles.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 190

Payment for redeemable shares
‘(1) Redeemable shares in a limited company may not be redeemed unless they are fully paid.
(2) The terms of redemption of shares in a limited company may provide that the amount payable on redemption may, by agreement between the company and the holder of the shares, be paid on a date later than the redemption date.
(3) Unless redeemed in accordance with provision authorised by subsection (2), the shares must be paid for on redemption.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 191

Financing of redemption
‘(1) A private limited company may redeem redeemable shares out of capital in accordance with Chapter (Redemption or purchase by private company out of capital) of this Part.
(2) Subject to that, redeemable shares in a limited company may only be redeemed out of—
(a) distributable profits of the company, or
(b) the proceeds of a fresh issue of shares made for the purposes of the redemption.
(3) Any premium payable on redemption of shares in a limited company must be paid out of distributable profits of the company, subject to the following provision.
(4) If the redeemable shares were issued at a premium, any premium payable on their redemption may be paid out of the proceeds of a fresh issue of shares made for the purposes of the redemption, up to an amount equal to—
(a) the aggregate of the premiums received by the company on the issue of the shares redeemed, or
(b) the current amount of the company’s share premium account (including any sum transferred to that account in respect of premiums on the new shares),
whichever is the less.
(5) The amount of the company’s share premium account is reduced by a sum corresponding (or by sums in the aggregate corresponding) to the amount of any payment made under subsection (3).
(6) This section is subject to section (Effect of company’s failure to redeem or purchase)(4) (terms of redemption enforceable in a winding up).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 192

Redeemed shares treated as cancelled
‘Where shares in a limited company are redeemed—
(a) the shares are treated as cancelled, and
(b) the amount of the company’s issued share capital is diminished accordingly by the nominal value of the shares redeemed.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 193

Notice to registrar of redemption
‘(1) If a limited company redeems any redeemable shares it must within one month after doing so give notice to the registrar, specifying the shares redeemed.
(2) The notice must be accompanied by a statement of capital.
(3) The statement of capital must state with respect to the company’s share capital immediately following the redemption—
(a) the total number of shares of the company,
(b) the aggregate nominal value of those shares,
(c) for each class of shares—
(i) prescribed particulars of the rights attached to the shares,
(ii) the total number of shares of that class, and
(iii) the aggregate nominal value of shares of that class, and
(d) the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium).
(4) If default is made in complying with this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(5) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 194

Power of limited company to purchase own shares
‘(1) A limited company having a share capital may purchase its own shares (including any redeemable shares), subject to—
(a) the following provisions of this Chapter, and
(b) any restriction or prohibition in the company’s articles.
(2) A limited company may not purchase its own shares if as a result of the purchase there would no longer be any issued shares of the company other than redeemable shares or shares held as treasury shares.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 195

Payment for purchase of own shares
‘(1) A limited company may not purchase its own shares unless they are fully paid.
(2) Where a limited company purchases its own shares, the shares must be paid for on purchase.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 196

Financing of purchase of own shares
‘(1) A private limited company may purchase its own shares out of capital in accordance with Chapter (Redemption or purchase by private company out of capital) of this Part.
(2) Subject to that—
(a) a limited company may only purchase its own shares out of—
(i) distributable profits of the company, or
(ii) the proceeds of a fresh issue of shares made for the purpose of financing the purchase, and
(b) any premium payable on the purchase by a limited company of its own shares must be paid out of distributable profits of the company, subject to subsection (3).
(3) If the shares to be purchased were issued at a premium, any premium payable on their purchase by the company may be paid out of the proceeds of a fresh issue of shares made for the purpose of financing the purchase, up to an amount equal to—
(a) the aggregate of the premiums received by the company on the issue of the shares purchased, or
(b) the current amount of the company’s share premium account (including any sum transferred to that account in respect of premiums on the new shares),
whichever is the less.
(4) The amount of the company’s share premium account is reduced by a sum corresponding (or by sums in the aggregate corresponding) to the amount of any payment made under subsection (3).
(5) This section has effect subject to section (Effect of company’s failure to redeem or purchase)(4) (terms of purchase enforceable in a winding up).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 197

Authority for purchase of own shares
‘(1) A limited company may only purchase its own shares—
(a) by an off-market purchase, in pursuance of a contract approved in advance in accordance with section (Authority for off-market purchase);
(b) by a market purchase, authorised in accordance with section (Authority for market purchase).
(2) A purchase is “off-market” if the shares either—
(a) are purchased otherwise than on a recognised investment exchange, or
(b) are purchased on a recognised investment exchange but are not subject to a marketing arrangement on the exchange.
(3) For this purpose a company’s shares are subject to a marketing arrangement on a recognised investment exchange if—
(a) they are listed under Part 6 of the Financial Services and Markets Act 2000 (c. 8), or
(b) the company has been afforded facilities for dealings in the shares to take place on the exchange—
(i) without prior permission for individual transactions from the authority governing that investment exchange, and
(ii) without limit as to the time during which those facilities are to be available.
(4) A purchase is a “market purchase” if it is made on a recognised investment exchange and is not an off-market purchase by virtue of subsection (2)(b).
(5) In this section “recognised investment exchange” means a recognised investment exchange (within the meaning of Part 18 of the Financial Services and Markets Act 2000 (c.8)) other than an overseas exchange (within the meaning of that Part).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 198

Authority for off-market purchase
‘(1) A company may only make an off-market purchase of its own shares in pursuance of a contract approved in advance in accordance with this section.
(2) Either—
(a) the terms of the proposed contract must be authorised by special resolution of the company before the contract is entered into, or
(b) the purchase must be in pursuance of a contingent purchase contract authorised by special resolution of the company before it was entered into.
(3) A “contingent purchase contract” means a contract, entered into by the company and relating to shares in the company, that does not amount to a contract to purchase the shares but under which the company may (subject to any conditions) become entitled or obliged to purchase the shares.
(4) The authority conferred by a resolution under this section may be varied, revoked or from time to time renewed by a special resolution of the company.
(5) In the case of a public company a resolution conferring, varying or renewing authority must specify a date on which the authority is to expire, which must not be later than 18 months after the date on which the resolution is passed.
(6) A resolution conferring, varying, revoking or renewing authority under this section is subject to—
section (Resolution authorising off-market purchase: exercise of voting rights) (exercise of voting rights), and
section Resolution authorising off-market purchase: disclosure of details of contract) (disclosure of details of contract).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 199

Resolution authorising off-market purchase: exercise of voting rights
‘(1) This section applies to a resolution to confer, vary, revoke or renew authority for the purposes of section (Authority for off-market purchase) (authority for off-market purchase of own shares).
(2) Where the resolution is proposed as a written resolution, a member who holds shares to which the resolution relates is not an eligible member.
(3) Where the resolution is proposed at a meeting of the company, it is not effective if—
(a) any member of the company holding shares to which the resolution relates exercises the voting rights carried by any of those shares in voting on the resolution, and
(b) the resolution would not have been passed if he had not done so.
(4) For this purpose—
(a) a member who holds shares to which the resolution relates is regarded as exercising the voting rights carried by those shares not only if he votes in respect of them on a poll on the question whether the resolution shall be passed, but also if he votes on the resolution otherwise than on a poll;
(b) notwithstanding anything in the company’s articles, any member of the company may demand a poll on that question;
(c) a vote and a demand for a poll by a person as proxy for a member are the same respectively as a vote and a demand by the member.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 200

Resolution authorising off-market purchase: disclosure of details of contract
‘(1) This section applies in relation to a resolution to confer, vary, revoke or renew authority for the purposes of section (Authority for off-market purchase) (authority for off-market purchase of own shares).
(2) A copy of the proposed contract (if it is in writing) or a memorandum setting out its terms (if it is not) must be made available to members—
(a) in the case of a written resolution, by being sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him;
(b) in the case of a resolution at a meeting, by being made available for inspection by members of the company both—
(i) at the company’s registered office for not less than 15 days ending with the date of the meeting, and
(ii) at the meeting itself.
(3) A memorandum of contract terms so made available must include the names of the members holding shares to which the contract relates.
(4) A copy of the contract so made available must have annexed to it a written memorandum specifying such of those names as do not appear in the contract itself.
(5) The resolution is not validly passed if the requirements of this section are not complied with.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 201

Variation of contract for off-market purchase
‘(1) A company may only agree to a variation of a contract authorised under section (Authority for off-market purchase) (authority for off-market purchase) if the variation is approved in advance in accordance with this section.
(2) The terms of the variation must be authorised by a special resolution of the company before it is agreed to.
(3) That authority may be varied, revoked or from time to time renewed by a special resolution of the company.
(4) In the case of a public company a resolution conferring, varying or renewing authority must specify a date on which the authority is to expire, which must not be later than 18 months after the date on which the resolution is passed.
(5) A resolution conferring, varying, revoking or renewing authority under this section is subject to—
section (Resolution authorising variation: exercise of voting rights) (exercise of voting rights), and
section (Resolution authorising variation: disclosure of details of variation) (disclosure of details of variation).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 202

Resolution authorising variation: exercise of voting rights
‘(1) This section applies to a resolution to confer, vary, revoke or renew authority for the purposes of section (Variation of contract for off-market purchase) (variation of contract for off-market purchase of own shares).
(2) Where the resolution is proposed as a written resolution, a member who holds shares to which the resolution relates is not an eligible member.
(3) Where the resolution is proposed at a meeting of the company, it is not effective if—
(a) any member of the company holding shares to which the resolution relates exercises the voting rights carried by any of those shares in voting on the resolution, and
(b) the resolution would not have been passed if he had not done so.
(4) For this purpose—
(a) a member who holds shares to which the resolution relates is regarded as exercising the voting rights carried by those shares not only if he votes in respect of them on a poll on the question whether the resolution shall be passed, but also if he votes on the resolution otherwise than on a poll;
(b) notwithstanding anything in the company’s articles, any member of the company may demand a poll on that question; and
(c) a vote and a demand for a poll by a person as proxy for a member are the same respectively as a vote and a demand by the member.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 203

Resolution authorising variation: disclosure of details of variation
‘(1) This section applies in relation to a resolution under section (Variation of contract for off-market purchase) (variation of contract for off-market purchase of own shares).
(2) A copy of the proposed variation (if it is in writing) or a written memorandum giving details of the proposed variation (if it is not) must be made available to members—
(a) in the case of a written resolution, by being sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him;
(b) in the case of a resolution at a meeting, by being made available for inspection by members of the company both—
(i) at the company’s registered office for not less than 15 days ending with the date of the meeting, and
(ii) at the meeting itself.
(3) There must also be made available as mentioned in subsection (2) a copy of the original contract or, as the case may be, a memorandum of its terms, together with any variations previously made.
(4) A memorandum of the proposed variation so made available must include the names of the members holding shares to which the variation relates.
(5) A copy of the proposed variation so made available must have annexed to it a written memorandum specifying such of those names as do not appear in the variation itself.
(6) The resolution is not validly passed if the requirements of this section are not complied with.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 204

Release of company’s rights under contract for off-market purchase
‘(1) An agreement by a company to release its rights under a contract approved under section (Authority for off-market purchase) (authorisation of off-market purchase) is void unless the terms of the release agreement are approved in advance in accordance with this section.
(2) The terms of the proposed agreement must be authorised by a special resolution of the company before the agreement is entered into.
(3) That authority may be varied, revoked or from time to time renewed by a special resolution of the company.
(4) In the case of a public company a resolution conferring, varying or renewing authority must specify a date on which the authority is to expire, which must not be later than 18 months after the date on which the resolution is passed.
(5) The provisions of—
section (Resolution authorising variation: exercise of voting rights) (exercise of voting rights), and
section (Resolution authorising variation: disclosure of details of variation) (disclosure of details of variation),
apply to a resolution authorising a proposed release agreement as they apply to a resolution authorising a proposed variation.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 205

Authority for market purchase
‘(1) A company may only make a market purchase of its own shares if the purchase has first been authorised by a resolution of the company.
(2) That authority—
(a) may be general or limited to the purchase of shares of a particular class or description, and
(b) may be unconditional or subject to conditions.
(3) The authority must—
(a) specify the maximum number of shares authorised to be acquired, and
(b) determine both the maximum and minimum prices that may be paid for the shares.
(4) The authority may be varied, revoked or from time to time renewed by a resolution of the company.
(5) A resolution conferring, varying or renewing authority must specify a date on which it is to expire, which must not be later than 18 months after the date on which the resolution is passed.
(6) A company may make a purchase of its own shares after the expiry of the time limit specified if—
(a) the contract of purchase was concluded before the authority expired, and
(b) the terms of the authority permitted the company to make a contract of purchase that would or might be executed wholly or partly after its expiration.
(7) A resolution to confer or vary authority under this section may determine either or both the maximum and minimum price for purchase by—
(a) specifying a particular sum, or
(b) providing a basis or formula for calculating the amount of the price (but without reference to any person’s discretion or opinion).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 206

Copy of contract or memorandum to be available for inspection
‘(1) This section applies where a company has entered into—
(a) a contract approved under section (Authority for off-market purchase) (authorisation of contract for off-market purchase), or
(b) a contract for a purchase authorised under section (Authority for market purchase) (authorisation of market purchase).
(2) The company must keep available for inspection at its registered office—
(a) a copy of the contract, or
(b) if the contract is not in writing, a written memorandum setting out its terms.
(3) The copy or memorandum must be kept available for inspection from the conclusion of the contract until the end of the period of ten years beginning with—
(a) the date on which the purchase of all the shares in pursuance of the contract is completed or,
(b) the date on which the contract otherwise determines.
(4) Every copy or memorandum required to be kept under this section must be kept open to inspection without charge—
(a) by any member of the company, and
(b) in the case of a public company, by any other person.
(5) The provisions of this section apply to a variation of a contract as they apply to the original contract.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 207

Enforcement of right to inspect copy or memorandum
‘(1) If default is made in complying with section (Copy of contract or memorandum to be available for inspection)(2) or (3), or an inspection required under section (Copy of contract or memorandum to be available for inspection)(4) is refused, an offence is committed by every officer of the company who is in default.
(2) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.
(3) In the case of refusal of an inspection required under section (Copy of contract or memorandum to be available for inspection)(4) the court may by order compel an immediate inspection.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 208

No assignment of company’s right to purchase own shares
‘The rights of a company under a contract authorised under—
(a) section (Authority for off-market purchase) (authority for off-market purchase), or
(b) section (Authority for market purchase) (authority for market purchase)
are not capable of being assigned.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 209

Payments apart from purchase price to be made out of distributable profits
‘(1) A payment made by a company in consideration of—
(a) acquiring any right with respect to the purchase of its own shares in pursuance of a contingent purchase contract approved under section (Authority for off-market purchase) (authorisation of off-market purchase),
(b) the variation of any contract approved under that section, or
(c) the release of any of the company’s obligations with respect to the purchase of any of its own shares under a contract—
(i) approved under section (Authority for off-market purchase), or
(ii) authorised under section (Authority for market purchase) (authorisation of market purchase),
must be made out of the company’s distributable profits.
(2) If this requirement is not met in relation to a contract, then—
(a) in a case within subsection (1)(a), no purchase by the company of its own shares in pursuance of that contract may be made under this Chapter;
(b) in a case within subsection (1)(b), no such purchase following the variation may be made under this Chapter;
(c) in a case within subsection (1)(c), the purported release is void.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 210

Treatment of shares purchased
‘Where a limited company makes a purchase of its own shares in accordance with this Chapter, then—
(a) if section (Treasury shares) (treasury shares) applies, the shares may be held and dealt with in accordance with Chapter (Treasury shares) of this Part;
(b) if that section does not apply—
(i) the shares are treated as cancelled, and
(ii) the amount of the company’s issued share capital is diminished accordingly by the nominal value of the shares cancelled.’.—[Margaret Hodge.]

Brought up, read the First time and Second time, and added to the Bill.

New Clause 211

Return to registrar of purchase of own shares
‘(1) Where a company purchases shares under this Chapter, it must deliver a return to the registrar within the period of 28 days beginning with the date on which the shares are delivered to it.
(2) The return must distinguish—
(a) shares in relation to which section (Treasury shares) (treasury shares) applies and shares in relation to which that section does not apply, and
(b) shares in relation to which that section applies—
(i) that are cancelled forthwith (under section (Treasury shares: cancellation) (cancellation of treasury shares)), and
(ii) that are not so cancelled.
(3) The return must state, with respect to shares of each class purchased—
(a) the number and nominal value of the shares, and
(b) the date on which they were delivered to the company.
(4) In the case of a public company the return must also state—
(a) the aggregate amount paid by the company for the shares, and
(b) the maximum and minimum prices paid in respect of shares of each class purchased.
(5) Particulars of shares delivered to the company on different dates and under different contracts may be included in a single return.
In such a case the amount required to be stated under subsection (4)(a) is the aggregate amount paid by the company for all the shares to which the return relates.
(6) If default is made in complying with this section an offence is committed by every officer of the company who is in default.
(7) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction to a fine not exceeding the statutory maximum and, for continued contravention, a daily default fine not exceeding one-tenth of the statutory maximum.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 212

Notice to registrar of cancellation of shares
‘(1) If on the purchase by a company of any of its own shares in accordance with this Part—
(a) section (Treasury shares) (treasury shares) does not apply (so that the shares are treated as cancelled), or
(b) that section applies but the shares are cancelled forthwith (under section (Treasury shares: cancellation) (cancellation of treasury shares)),
the company must give notice of cancellation to the registrar, within the period of 28 days beginning with the date on which the shares are delivered to it, specifying the shares cancelled.
(2) The notice must be accompanied by a statement of capital.
(3) The statement of capital must state with respect to the company’s share capital immediately following the cancellation—
(a) the total number of shares of the company,
(b) the aggregate nominal value of those shares,
(c) for each class of shares—
(i) prescribed particulars of the rights attached to the shares,
(ii) the total number of shares of that class, and
(iii) the aggregate nominal value of shares of that class, and
(d) the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium).
(4) If default is made in complying this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(5) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 213

Power of private limited company to redeem or purchase own shares out of capital
‘(1) A private limited company may in accordance with this Chapter, but subject to any restriction or prohibition in the company’s articles, make a payment in respect of the redemption or purchase of its own shares otherwise than out of distributable profits or the proceeds of a fresh issue of shares.
(2) References below in this Chapter to payment out of capital are to any payment so made, whether or not it would be regarded apart from this section as a payment out of capital.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 214

The permissible capital payment
‘(1) The payment that may, in accordance with this Chapter, be made by a company out of capital in respect of the redemption or purchase of its own shares is such amount as, after applying for that purpose—
(a) any available profits of the company, and
(b) the proceeds of any fresh issue of shares made for the purposes of the redemption or purchase,
is required to meet the price of redemption or purchase.
(2) That is referred to below in this Chapter as “the permissible capital payment” for the shares.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 215

Available profits
‘(1) For the purposes of this Chapter the available profits of the company, in relation to the redemption or purchase of any shares, are the profits of the company that are available for distribution (within the meaning of Part (Distributions)).
(2) But the question whether a company has any profits so available, and the amount of any such profits, shall be determined in accordance with section (Determination of available profits) instead of in accordance with sections (Justification of distribution by reference to relevant accounts) to (Determination of profit or loss in respect of asset where records incomplete) in that Part.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 216

Determination of available profits
‘(1) The available profits of the company are determined as follows.
(2) First, determine the profits of the company by reference to the following items as stated in the relevant accounts—
(a) profits, losses, assets and liabilities,
(b) provisions of the following kinds—
(i) where the relevant accounts are Companies Act accounts, provisions of a kind specified for the purposes of this subsection by regulations under section 378;
(ii) where the relevant accounts are IAS accounts, provisions of any kind;
(c) share capital and reserves (including undistributable reserves).
(3) Second, reduce the amount so determined by the amount of—
(a) any distribution lawfully made by the company, and
(b) any other relevant payment lawfully made by the company out of distributable profits,
after the date of the relevant accounts and before the end of the relevant period.
(4) For this purpose “other relevant payment lawfully made” includes—
(a) financial assistance lawfully given out of distributable profits in accordance with Chapter (Financial assistance for acquisition of own shares) of this Part,
(b) payments lawfully made out of distributable profits in respect of the purchase by the company of any shares in the company, and
(c) payments of any description specified in section (Payments apart from purchase price to be made out of distributable profits) (payments other than purchase price to be made out of distributable profits) lawfully made by the company.
(5) The resulting figure is the amount of available profits.
(6) For the purposes of this section “the relevant accounts” are any accounts that—
(a) are prepared as at a date within the relevant period, and
(b) are such as to enable a reasonable judgment to be made as to the amounts of the items mentioned in subsection (2).
(7) In this section “the relevant period” means the period of three months ending with the date on which the directors’ statement is made in accordance with section (Directors’ statement and auditor’s report).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 217

Requirements for payment out of capital
‘(1) A payment out of capital by a private company for the redemption or purchase of its own shares is not lawful unless the requirements of the following sections are met—
section (Directors’ statement and auditor’s report) (directors’ statement and auditor’s report);
section (Approval by special resolution) (approval by special resolution);
section (Public notice of proposed payment) (public notice of proposed payment);
section (Directors’ statement and auditor’s report to be available for inspection) (directors’ statement and auditor’s report to be available for inspection)
(2) This is subject to any order of the court under section (Application to court to cancel resolution) (power of court to extend period for compliance on application by persons objecting to payment).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 218

Directors’ statement and auditor’s report
‘(1) The company’s directors must make a statement in accordance with this section.
(2) The statement must specify the amount of the permissible capital payment for the shares in question.
(3) It must state that, having made full inquiry into the affairs and prospects of the company, the directors have formed the opinion—
(a) as regards its initial situation immediately following the date on which the payment out of capital is proposed to be made, that there will be no grounds on which the company could then be found unable to pay its debts, and
(b) as regards its prospects for the year immediately following that date, that having regard to—
(i) their intentions with respect to the management of the company business during that year, and
(ii) the amount and character of the financial resources that will in their view be available to the company during that year,
the company will be able to continue to carry on business as a going concern (and will accordingly be able to pay its debts as they fall due) throughout that year.
(4) In forming their opinion for the purposes of subsection (3)(a), the directors must take into account all of the company’s liabilities (including any contingent or prospective liabilities).
(5) The directors’ statement must be in the prescribed form and must contain such information with respect to the nature of the company’s business as may be prescribed.
(6) It must in addition have annexed to it a report addressed to the directors by the company’s auditor stating that—
(a) he has inquired into the company’s state of affairs,
(b) the amount specified in the statement as the permissible capital payment for the shares in question is in his view properly determined in accordance with sections (The permissible capital payment) to (Determination of available profits), and
(c) he is not aware of anything to indicate that the opinion expressed by the directors in their statement as to any of the matters mentioned in subsection (3) above is unreasonable in all the circumstances.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 219

Directors’ statement: offence if no reasonable grounds for opinion
‘(1) If the directors make a statement under section (Directors’ statement and auditor’s report) without having reasonable grounds for the opinion expressed in it, an offence is committed by every director who is in default.
(2) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both);
(b) on summary conviction—
(i) in England and Wales, to imprisonment for a term not exceeding twelve months or a fine not exceeding the statutory maximum (or both);
(ii) in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum (or both).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 220

Payment to be approved by special resolution
‘(1) The payment out of capital must be approved by a special resolution of the company.
(2) The resolution must be passed on, or within the week immediately following, the date on which the directors make the statement required by section (Directors’ statement and auditor’s report).
(3) A resolution under this section is subject to—
section (Resolution authorising payment: exercise of voting rights) (exercise of voting rights), and
Section (Resolution authorising payment: disclosure of directors’ statement and auditor’s report) (disclosure of directors’ statement and auditors’ report).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 221

Resolution authorising payment: exercise of voting rights
‘(1) This section applies to a resolution under section (Payment to be approved by special resolution) (authority for payment out of capital for redemption or purchase of own shares).
(2) Where the resolution is proposed as a written resolution, a member who holds shares to which the resolution relates is not an eligible member.
(3) Where the resolution is proposed at a meeting of the company, it is not effective if—
(a) any member of the company holding shares to which the resolution relates exercises the voting rights carried by any of those shares in voting on the resolution, and
(b) the resolution would not have been passed if he had not done so.
(4) For this purpose—
(a) a member who holds shares to which the resolution relates is regarded as exercising the voting rights carried by those shares not only if he votes in respect of them on a poll on the question whether the resolution shall be passed, but also if he votes on the resolution otherwise than on a poll;
(b) notwithstanding anything in the company’s articles, any member of the company may demand a poll on that question;
(c) a vote and a demand for a poll by a person as proxy for a member are the same respectively as a vote and a demand by the member.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 222

Resolution authorising payment: disclosure of directors’ statement and auditors’ report
‘(1) This section applies to a resolution under section (Payment to be approved by special resolution) (resolution authorising payment out of capital for redemption or purchase of own shares).
(2) The directors’ statement and auditors’ report under section (Directors’ statement and auditor’s report) must be made available to members—
(a) in the case of a written resolution, by being sent or submitted to every eligible member at or before the time at which the proposed resolution is sent or submitted to him;
(b) in the case of a resolution at a meeting, by being made available for inspection by members of the company at the meeting.
(3) The resolution is ineffective if this requirement is not complied with.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 223

Public notice of proposed payment
‘(1) Within the week immediately following the date of the resolution under section (Payment to be approved by special resolution) the company must cause to be published in the Gazette a notice—
(a) stating that the company has approved a payment out of capital for the purpose of acquiring its own shares by redemption or purchase or both (as the case may be),
(b) specifying—
(i) the amount of the permissible capital payment for the shares in question, and
(ii) the date of the resolution,
(c) stating that the directors’ statement and auditor’s report required by section (Directors’ statement and auditor’s report) are available for inspection at the company’s registered office, and
(d) stating that any creditor of the company may at any time within the five weeks immediately following the date of the resolution apply to the court under section (Application to court to cancel resolution) for an order preventing the payment.
(2) Within the week immediately following the date of the resolution the company must also either—
(a) cause a notice to the same effect as that required by subsection (1) to be published in an appropriate national newspaper, or
(b) give notice in writing to that effect to each of its creditors.
(3) “An appropriate national newspaper” means a newspaper circulating throughout the part of the United Kingdom in which the company is registered.
(4) Not later than the day on which the company—
(a) first publishes the notice required by subsection (1), or
(b) if earlier, first publishes or gives the notice required by subsection (2),
the company must deliver to the registrar a copy of the directors’ statement and auditor’s report required by section (Directors’ statement and auditor’s report).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 224

Directors’ statement and auditor’s report to be available for inspection
‘(1) The directors’ statement and auditor’s report must be kept available for inspection at the company’s registered office throughout the period—
(a) beginning with the day on which the company—
(i) first publishes the notice required by section (Public notice of proposed payment)(1), or
(ii) if earlier, first publishes or gives the notice required by section (Public notice of proposed payment)(2), and
(b) ending five weeks after the date of the resolution for payment out of capital.
(2) They must be open to the inspection of any member or creditor of the company without charge.
(3) If an inspection under subsection (2) is refused, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(4) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.
(5) In the case of a refusal of an inspection required by subsection (2), the court may by order compel an immediate inspection.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 225

Application to court to cancel resolution
‘(1) Where a private company passes a special resolution approving a payment out of capital for the redemption or purchase of any of its shares—
(a) any member of the company (other than one who consented to or voted in favour of the resolution), and
(b) any creditor of the company,
may apply to the court for the cancellation of the resolution.
(2) The application—
(a) must be made within five weeks after the passing of the resolution, and
(b) may be made on behalf of the persons entitled to make it by such one or more of their number as they may appoint in writing for the purpose.
(3) On an application under this section the court may if it thinks fit—
(a) adjourn the proceedings in order that an arrangement may be made to the satisfaction of the court—
(i) for the purchase of the interests of dissentient members, or
(ii) for the protection of dissentient creditors, and
(b) give such directions and make such orders as it thinks expedient for facilitating or carrying into effect any such arrangement.
(4) Subject to that, the court must make an order either cancelling or confirming the resolution, and may do so on such terms and conditions as it thinks fit.
(5) If the court confirms the resolution, it may by order alter or extend any date or period of time specified—
(a) in the resolution, or
(b) in any provision of this Chapter applying to the redemption or purchase to which the resolution relates.
(6) The court’s order may, if the court thinks fit—
(a) provide for the purchase by the company of the shares of any of its members and for the reduction accordingly of the company’s capital, and
(b) make any alteration in the company’s articles that may be required in consequence of that provision.
(7) The court’s order may, if the court thinks fit, require the company not to make any, or any specified, amendments of its articles without the leave of the court.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 226

Notice to registrar of court application or order
‘(1) On making an application under section (Application to court to cancel resolution) (application to court to cancel resolution) the applicants, or the person making the application on their behalf, must immediately give notice to the registrar.
This is without prejudice to any provision of rules of court as to service of notice of the application.
(2) On being served with notice of any such application, the company must immediately give notice to the registrar.
(3) Within 15 days of the making of the court’s order on the application, or such longer period as the court may at any time direct, the company must deliver to the registrar a copy of the order.
(4) If a company fails to comply with subsection (2) or (3) an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(5) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 227

When payment out of capital to be made
‘(1) The payment out of capital must be made—
(a) no earlier than five weeks after the date on which the resolution under section (Payment to be approved by special resolution) is passed, and
(b) no more than seven weeks after that date.
(2) This is subject to any exercise of the court’s powers under section (Application to court to cancel resolution)(5) (power to alter or extend time where resolution confirmed after objection).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 228

Treasury shares
‘(1) This section applies where—
(a) a limited company makes a purchase of its own shares in accordance with Chapter (Purchase of own shares),
(b) the purchase is made out of distributable profits, and
(c) the shares are qualifying shares.
(2) For this purpose “qualifying shares” means shares that—
(a) are included in the official list in accordance with the provisions of Part 6 of the Financial Services and Markets Act 2000 (c. 8),
(b) are traded on the market known as the Alternative Investment Market established under the rules of London Stock Exchange plc,
(c) are officially listed in an EEA State, or
(d) are traded on a regulated market.
In paragraph (a) “the official list” has the meaning given in section 103(1) of the Financial Services and Markets Act 2000 (c.8).
(3) Where this section applies the company may—
(a) hold the shares (or any of them), or
(b) deal with any of them, at any time, in accordance with section (Treasury shares: disposal) or (Treasury shares: cancellation).
(4) Where shares are held by the company, the company must be entered in its register of members as the member holding the shares.
(5) In the Companies Acts references to a company holding shares as treasury shares are to the company holding shares that—
(a) were (or are treated as having been) purchased by it in circumstances in which this section applies, and
(b) have been held by the company continuously since they were so purchased (or treated as purchased).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 229

Treasury shares: maximum holdings
‘(1) Where a company has shares of only one class, the aggregate nominal value of shares held as treasury shares must not at any time exceed 10% of the nominal value of the issued share capital of the company at that time.
(2) Where the share capital of a company is divided into shares of different classes, the aggregate nominal value of the shares of any class held as treasury shares must not at any time exceed 10% of the nominal value of the issued share capital of the shares of that class at that time.
(3) If subsection (1) or (2) is contravened by a company, the company must dispose of or cancel the excess shares, in accordance with section (Treasury shares: disposal), before the end of the period of twelve months beginning with the date on which that contravention occurs.
The “excess shares” means such number of the shares held by the company as treasury shares at the time in question as resulted in the limit being exceeded.
(4) Where a company purchases qualifying shares out of distributable profits in accordance with section (Treasury shares), a contravention by the company of subsection (1) or (2) above does not render the acquisition void under section (General rule against limited company acquiring its own shares) (general rule against limited company acquiring its own shares).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 230

Treasury shares: exercise of rights
‘(1) This section applies where shares are held by a company as treasury shares.
(2) The company must not exercise any right in respect of the treasury shares, and any purported exercise of such a right is void.
This applies, in particular, to any right to attend or vote at meetings.
(3) No divided may be paid, and no other distribution (whether in cash or otherwise) of the company’s assets (including any distribution of assets to members on a winding up) may be made to the company, in respect of the treasury shares.
(4) Nothing in this section prevents—
(a) an allotment of shares as fully paid bonus shares in respect of the treasury shares, or
(b) the payment of any amount payable on the redemption of the treasury shares (if they are redeemable shares).
(5) Shares allotted as fully paid bonus shares in respect of the treasury shares are treated as if purchased by the company, at the time they were allotted, in circumstances in which section (Treasury shares)(1) (treasury shares) applied.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 231

Treasury shares: disposal
‘(1) Where shares are held as treasury shares, the company may at any time—
(a) sell the shares (or any of them) for a cash consideration, or
(b) transfer the shares (or any of them) for the purposes of or pursuant to an employees’ share scheme.
(2) In subsection (1)(a) “cash consideration” means—
(a) cash received by the company, or
(b) a cheque received by the company in good faith that the directors have no reason for suspecting will not be paid, or
(c) a release of a liability of the company for a liquidated sum, or
(d) an undertaking to pay cash to the company on or before a date not more than 90 days after the date on which the company agrees to sell the shares.
For this purpose “cash” includes foreign currency.
(3) If the company receives a notice under section (Right of offeror to buy out minority shareholder) (takeover offers: right of offeror to buy out minority shareholders) that a person desires to acquire shares held by the company as treasury shares, the company must not sell or transfer the shares to which the notice relates except to that person.’,—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 232

Treasury shares: notice of disposal
‘(1) Where shares held by a company as treasury shares—
(a) are sold, or
(b) are transferred for the purposes of an employees’ share scheme,
the company must deliver a return to the registrar not later than 28 days after the shares are disposed of.
(2) The return must state with respect to shares of each class disposed of—
(a) the number and nominal value of the shares, and
(b) the date on which they were disposed of.
(3) Particulars of shares disposed of on different dates may be included in a single return.
(4) If default is made in complying with this section an offence is committed by every officer of the company who is in default.
(5) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum and, for continued contravention, a daily default fine not exceeding one-tenth of the statutory maximum.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 233

Treasury shares: cancellation
‘(1) Where shares are held as treasury shares, the company may at any time cancel the shares (or any of them).
(2) If shares held as treasury shares cease to be qualifying shares, the company must forthwith cancel the shares.
(3) For this purpose shares are not to be regarded as ceasing to be qualifying shares by virtue only of—
(a) the suspension of their listing in accordance with the applicable rules in the EEA state in which the shares are officially listed, or
(b) the suspension of their trading in accordance with—
(i) in the case of shares traded on the market known as the Alternative Investment Market, the rules of London Stock Exchange plc, and
(ii) in any other case, the rules of the regulated market on which they are traded.
(4) If company cancels shares held as treasury shares, the amount of the company’s share capital is reduced accordingly by the nominal amount of the shares cancelled.
(5) The directors may take any steps required to enable the company to cancel its shares under this section without complying with the provisions of Chapter (Reduction of share capital) of Part (A company’s share capital) (reduction of share capital).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 234

Treasury shares: notice of cancellation
‘(1) Where shares held by a company as treasury shares are cancelled, the company must deliver a return to the registrar not later than 28 days after the shares are cancelled.
This does not apply to shares that are cancelled forthwith on their acquisition by the company (see section (Notice to registrar of cancellation of shares)).
(2) The return must state with respect to shares of each class cancelled—
(a) the number and nominal value of the shares, and
(b) the date on which they were cancelled.
(3) Particulars of shares cancelled on different dates may be included in a single return.
(4) The notice must be accompanied by a statement of capital.
(5) The statement of capital must state with respect to the company’s share capital immediately following the cancellation—
(a) the total number of shares of the company,
(b) the aggregate nominal value of those shares,
(c) for each class of shares—
(i) prescribed particulars of the rights attached to the shares,
(ii) the total number of shares of that class, and
(iii) the aggregate nominal value of shares of that class, and
(d) the amount paid up and the amount (if any) unpaid on each share (whether on account of the nominal value of the share or by way of premium).
(6) If default is made in complying with this section an offence is committed by every officer of the company who is in default.
(7) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum and, for continued contravention, a daily default fine not exceeding one-tenth of the statutory maximum.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 235

Treasury shares: treatment of proceeds of sale
‘(1) Where shares held as treasury shares are sold, the proceeds of sale must be dealt with in accordance with this section.
(2) If the proceeds of sale are equal to or less than the purchase price paid by the company for the shares, the proceeds are treated for the purposes of Part (Distributions) (distributions) as a realised profit of the company.
(3) If the proceeds of sale exceed the purchase price paid by the company—
(a) an amount equal to the purchase price paid is treated as a realised profit of the company for the purposes of that Part, and
(b) the excess must be transferred to the company’s share premium account.
(4) For the purposes of this section—
(a) the purchase price paid by the company must be determined by the application of a weighted average price method, and
(b) if the shares were allotted to the company as fully paid bonus shares, the purchase price paid for them is treated as nil.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 236

Treasury shares: offences
‘(1) If a company contravenes any of the provisions of this Chapter (except section (Treasury shares: notice of cancellation) (notice of cancellation)), an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(2) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction to a fine not exceeding the statutory maximum.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 237

The capital redemption reserve
‘(1) Where under this Part shares of a limited company are redeemed or purchased wholly out of the company’s profits, the amount by which the company’s issued share capital is diminished—
(a) on cancellation of the shares redeemed or purchased (see section (Redeemed shares treated as cancelled) or (Treatment of shares purchased)(3)), or
(b) on cancellation of shares held as treasury shares (see section (Treasury shares: cancellation),
must be transferred to a reserve, called the “capital redemption reserve”.
(2) Where—
(a) the shares are redeemed or purchased wholly or partly out of the proceeds of a fresh issue, and
(b) the aggregate amount of the proceeds is less than the aggregate nominal value of the shares redeemed or purchased,
the amount of the difference must be transferred to the capital redemption reserve.
(3) Subsection (2) does not apply in the case of a private company if, in addition to the proceeds of the fresh issue, the company applies a payment out of capital under Chapter (Redemption or purchase by private company out of capital) in making the purchase of shares.
(4) The company may use the capital redemption reserve to pay up new shares to be allotted to members as fully paid bonus shares.
(5) Subject to that, the provisions of the Companies Acts relating to the reduction of a company’s share capital apply as if the capital redemption reserve were part of its paid up share capital.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 238

Accounting consequences of payment out of capital
‘(1) This section applies where a payment out of capital is made in accordance with Chapter (Redemption or purchase by private company out of capital) (redemption or purchase of own shares by private company out of capital).
(2) If the permissible capital payment is less than the nominal amount of the shares redeemed or purchased, the amount of the difference must be transferred to the company’s capital redemption reserve.
(3) If the permissible capital payment is greater than the nominal amount of the shares redeemed or purchased—
(a) the amount of any capital redemption reserve, share premium account or fully paid share capital of the company, and
(b) any amount representing unrealised profits of the company for the time being standing to the credit of any revaluation reserve maintained by the company,
may be reduced by a sum not exceeding (or by sums not in total exceeding) the amount by which the permissible capital payment exceeds the nominal amount of the shares.
(4) Where the proceeds of a fresh issue are applied by the company in making a redemption or purchase of its own shares in addition to a payment out of capital under this Chapter, the references in subsections (2) and (3) to the permissible capital payment are to be read as referring to the aggregate of that payment and those proceeds.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 239

Effect of company’s failure to redeem or purchase
‘(1) This section applies where a company—
(a) issues shares on terms that they are or are liable to be redeemed, or
(b) agrees to purchase any of its shares.
(2) The company is not liable in damages in respect of any failure on its part to redeem or purchase any of the shares.
This is without prejudice to any right of the holder of the shares other than his right to sue the company for damages in respect of its failure.
(3) The court shall not grant an order for specific performance of the terms of redemption or purchase if the company shows that it is unable to meet the costs of redeeming or purchasing the shares in question out of distributable profits.
(4) If the company is wound up and at the commencement of the winding up any of the shares have not been redeemed or purchased, the terms of redemption or purchase may be enforced against the company.
When shares are redeemed or purchased under this subsection, they are treated as cancelled.
(5) Subsection (4) does not apply if—
(a) the terms provided for the redemption or purchase to take place at a date later than that of the commencement of the winding up, or
(b) during the period—
(i) beginning with the date on which the redemption or purchase was to have taken place, and
(ii) ending with the commencement of the winding up,
the company could not at any time have lawfully made a distribution equal in value to the price at which the shares were to have been redeemed or purchased.
(6) There shall be paid in priority to any amount that the company is liable under subsection (4) to pay in respect of any shares—
(a) all other debts and liabilities of the company (other than any due to members in their character as such), and
(b) if other shares carry rights (whether as to capital or as to income) that are preferred to the rights as to capital attaching to the first-mentioned shares, any amount due in satisfaction of those preferred rights.
Subject to that, any such amount shall be paid in priority to any amounts due to members in satisfaction of their rights (whether as to capital or income) as members.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 240

Meaning of “distributable profits”
‘In this Part (except in Chapter (Financial assistance for purchase of own shares) (financial assistance): see section (Definitions for this Chapter) “distributable profits”, in relation to the making of any payment by a company, means profits out of which the company could lawfully make a distribution (within the meaning given by section (Distributions to be made only out of profits available for the purpose)) equal in value to the payment.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 241

General power to make further provision by regulations
‘(1) The Secretary of State may by regulations modify the provisions of this Part.
(2) The regulations may—
(a) amend or repeal any of the provisions of this Part, or
(b) make such other provision as appears to the Secretary of State appropriate in place of any of the provisions of this Part.
(3) Regulations under this section may make consequential amendments or repeals in other provisions of this Act, or in other enactments.
(4) Regulations under this section are subject to affirmative resolution procedure.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 242

Meaning of “debenture”
‘In the Companies Acts “debenture” includes debenture stock, bonds and any other securities of a company, whether or not constituting a charge on the assets of the company.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 243

Perpetual debentures
‘(1) A condition contained in debentures, or in a deed for securing debentures, is not invalid by reason only that the debentures are thereby made—
(a) irredeemable, or
(b) redeemable only—
(i) on the happening of a contingency (however remote), or
(ii) on the expiration of a period (however long),
any rule of equity to the contrary notwithstanding.
(2) Subsection (1) applies to debentures whenever issued and to deeds whenever executed.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 244

Enforcement of contract to subscribe for debentures
‘A contract with a company to take up and pay for debentures of the company may by enforced by an order for specific performance.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 245

Registration of allotment of debentures
‘(1) A company must register an allotment of debentures as soon as practicable and in any event within two months after the date of the allotment.
(2) If a company fails to comply with this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(3) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.
(4) For the duties of the company as to the issue of the debentures, or certificates of debenture stock, see Part 22 (certification and transfer of securities).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 246

Debentures to bearer (Scotland)
‘Notwithstanding anything in the statute of the Scots Parliament of 1696, chapter 25, debentures to bearer issued in Scotland are valid and binding according to their terms.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 247

Register of debenture holders
‘(1) Any register of debenture holders of a company that is kept by the company must be kept available for inspection—
(a) at the company’s registered office, or
(b) at another place in the part of the United Kingdom in which the company is registered.
(2) A company must give notice to the registrar of the place where any such register is kept available for inspection and of any change in that place.
(3) No such notice is required if the register has, at all times since it came into existence, been kept available for inspection at the company’s registered office.
(4) If a company makes default for 14 days in complying with subsection (2), an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(5) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and in the case of continued contravention to a daily default fine not exceeding one-tenth of level 3 on the standard scale.
(6) References in this section to a register of debenture holders include a duplicate—
(a) of a register of debenture holders that is kept outside the United Kingdom, or
(b) of any part of such a register.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 248

Register of debenture holders: right to inspect and require copy
‘(1) Every register of debenture holders of a company must, except when duly closed, be open to the inspection—
(a) of the registered holder of any such debentures, or any holder of shares in the company, without charge, and
(b) of any other person on payment of such fee as may be prescribed.
(2) Any person may require a copy of the register, or any part of it, on payment of such fee as may be prescribed.
(3) A person seeking to exercise either of the rights conferred by this section must make a request to the company to that effect.
(4) The request must contain the following information—
(a) in the case of an individual, his name and address;
(b) in the case of an organisation, the name and address of an individual responsible for making the request on behalf of the organisation;
(c) the purpose for which the information is to be used; and
(d) whether the information will be disclosed to any other person, and if so—
(i) where that person is an individual, his name and address,
(ii) where that person is an organisation, the name and address of an individual responsible for receiving the information on its behalf, and
(iii) the purpose for which the information is to be used by that person.
(5) For the purposes of this section a register is “duly closed” if it is closed in accordance with provision contained—
(a) in the articles or in the debentures,
(b) in the case of debenture stock in the stock certificates, or
(c) in the trust deed or other document securing the debentures or debenture stock.
The total period for which a register is closed in any year must not exceed 30 days.
(6) References in this section to a register of debenture holders include a duplicate—
(a) of a register of debenture holders that is kept outside the United Kingdom, or
(b) of any part of such a register.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 249

Register of debenture holders: response to request for inspection or copy
‘(1) Where a company receives a request under section (Register of debenture holders: right to inspect and require copy) (register of debenture holders: right to inspect and require copy), it must within five working days either—
(a) comply with the request, or
(b) apply to the court.
(2) If it applies to the court it must notify the person making the request.
(3) If on an application under this section the court is satisfied that the inspection or copy is not sought for a proper purpose—
(a) it shall direct the company not to comply with the request, and
(b) it may further order that the company’s costs (in Scotland, expenses) on the application be paid in whole or in part by the person who made the request, even if he is not a party to the application.
(4) If the court makes such a direction and it appears to the court that the company is or may be subject to other requests made for a similar purpose (whether made by the same person or different persons), it may direct that the company is not to comply with any such request.
The order must contain such provision as appears to the court appropriate to identify the requests to which it applies.
(5) If on an application under this section the court does not direct the company not to comply with the request, the company must comply with the request immediately upon the court giving its decision or, as the case may be, the proceedings being discontinued.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 250

Register of debenture holders: refusal of inspection or default in providing copy
‘(1) If an inspection required under section (Register of debenture holders: right to inspect and require copy) (register of debenture holders: right to inspect and require copy) is refused or default is made in providing a copy required under that section, otherwise than in accordance with an order of the court, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(2) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.
(3) In the case of any such refusal or default the court may by order compel an immediate inspection or, as the case may be, direct that the copy required be sent to the person requesting it.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 251

Register of debenture holders: offences in connection with request for or disclosure of information
‘(1) It is an offence for a person knowingly or recklessly to make in a request under section (Register of debenture holders: right to inspect and require copy) (register of debenture holders: right to inspect and require copy) a statement that is misleading, false or deceptive in a material particular.
(2) It is an offence for a person in possession of information obtained by exercise of either of the rights conferred by that section—
(a) to do anything that results in the information being disclosed to another person, or
(b) to fail to do anything with the result that the information is disclosed to another person,
knowing or having reason to suspect that person may use the information for a purpose that is not a proper purpose.
(3) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both);
(b) on summary conviction—
(i) in England and Wales, to imprisonment for a term not exceeding twelve months or to a fine not exceeding the statutory maximum (or both);
(ii) in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months, or to a fine not exceeding the statutory maximum (or both).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 252

Time limit for claims arising from entry in register
‘(1) Liability incurred by a company—
(a) from the making or deletion of an entry in the register of debenture holders, or
(b) from a failure to make or delete any such entry,
is not enforceable more than ten years after the date on which the entry was made or deleted or, as the case may be, the failure first occurred.
(2) This is without prejudice to any lesser period of limitation (and, in Scotland, to any rule that the obligation giving rise to the liability prescribes before the expiry of that period).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 253

Right of debenture holder to copy of deed
‘(1) Any holder of debentures of a company is entitled, on request and on payment of such fee as may be prescribed, to be provided with a copy of any trust deed for securing the debentures.
(2) If default is made in complying with this section, an offence is committed by every officer of the company who is in default.
(3) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.
(4) In the case of any such default the court may direct that the copy required be sent to the person requiring it.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 254

Liability of trustees of debentures
‘(1) Any provision contained in—
(a) a trust deed for securing an issue of debentures, or
(b) any contract with the holders of debentures secured by a trust deed,
is void in so far as it would have the effect of exempting a trustee of the deed from, or indemnifying him against, liability for breach of trust where he fails to show the degree of care and diligence required of him as trustee, having regard to the provisions of the trust deed conferring on him any powers, authorities or discretions.
(2) Subsection (1) does not invalidate—
(a) a release otherwise validly given in respect of anything done or omitted to be done by a trustee before the giving of the release;
(b) any provision enabling such a release to be given—
(i) on being agreed to by a majority of not less than 75% in value of the debenture holders present and voting in person or, where proxies are permitted, by proxy at a meeting summoned for the purpose, and
(ii) either with respect to specific acts or omissions or on the trustee dying or ceasing to act.
(3) This section is subject to section (Liability of trustees of debentures: saving for certain older provisions) (saving for certain older provisions).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 255

Liability of trustees of debentures: saving for certain older provisions
‘(1) Section (Liability of trustees of debentures) (liability of trustees of debentures) does not operate—
(a) to invalidate any provision in force on the relevant date so long as any person—
(i) then entitled to the benefit of the provision, or
(ii) afterwards given the benefit of the provision under subsection (3) below,
remains a trustee of the deed in question, or
(b) to deprive any person of any exemption or right to be indemnified in respect of anything done or omitted to be done by him while any such provision was in force.
(2) The relevant date for this purpose is—
(a) 1st July 1948 in a case where section 192 of the Companies Act 1985 (c. 6) applied immediately before the commencement of this section;
(b) 1st July 1961 in a case where Article 201 of the Companies (Northern Ireland) Order 1986 then applied.
(3) While any trustee of a trust deed remains entitled to the benefit of a provision saved by subsection (1) above the benefit of that provision may be given either—
(a) to all trustees of the deed, present and future, or
(b) to any named trustees or proposed trustees of it,
by a resolution passed by a majority of not less than 75% in value of the debenture holders present in person or, where proxies are permitted, by proxy at a meeting summoned for the purpose.
(4) A meeting for that purpose must be summoned in accordance with the provisions of the deed or, if the deed makes no provision for summoning meetings, in a manner approved by the court.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 256

Power to re-issue redeemed debentures
‘(1) Where a company has redeemed debentures previously issued, then unless—
(a) provision to the contrary (express or implied) is contained in the company’s articles or in any contract made by the company, or
(b) the company has, by passing a resolution to that effect or by some other act, manifested its intention that the debentures shall be cancelled,
the company may re-issue the debentures, either by re-issuing the same debentures or by issuing new debentures in their place.
This subsection is deemed always to have had effect.
(2) On a re-issue of redeemed debentures the person entitled to the debentures has (and is deemed always to have had) the same priorities as if the debentures had never been redeemed.
(3) The re-issue of a debenture or the issue of another debenture in its place under this section is treated as the issue of a new debenture for the purposes of stamp duty.
It is not so treated for the purposes of any provision limiting the amount or number of debentures to be issued.
(4) A person lending money on the security of a debenture re-issued under this section which appears to be duly stamped may give the debenture in evidence in any proceedings for enforcing his security without payment of the stamp duty or any penalty in respect of it, unless he had notice (or, but for his negligence, might have discovered) that the debenture was not duly stamped.
In that case the company is liable to pay the proper stamp duty and penalty.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 257

Deposit of debentures to secure advances
‘Where a company has deposited any of its debentures to secure advances from time to time on current account or otherwise, the debentures are not treated as redeemed by reason only of the company’s account having ceased to be in debit while the debentures remained so deposited.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 258

Priorities where debentures secured by floating charge
‘(1) This section applies where debentures of a company registered in England and Wales or Northern Ireland are secured by a charge that, as created, was a floating charge.
(2) If possession is taken by or on behalf of the holders of the debentures of any property comprised in or subject to the charge, and the company is not at that time in the course of being wound up, the company’s preferential debts shall be paid out of assets coming to the hands of the persons taking possession in priority to any claims for principal or interest in respect of the debentures.
(3) “Preferential debts” means the categories of debts listed in Schedule 6 to the Insolvency Act 1986 (c. 45) or Schedule 4 to the Insolvency (Northern Ireland) Order 1989 (S.I.1989/2405 (N.I.19)).
For the purposes of that Schedule “the relevant date” is the date of possession being taken as mentioned in subsection (2).
(4) Payments under this section shall be recouped, as far as may be, out of the assets of the company available for payment of general creditors.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 259

Share certificate to be evidence of title
‘(1) In the case of a company registered in England and Wales or Northern Ireland, a certificate under the common seal of the company specifying any shares held by a member is prima facie evidence of his title to the shares.
(2) In the case of a company registered in Scotland—
(a) a certificate under the common seal of the company specifying any shares held by a member, or
(b) a certificate specifying any shares held by a member and subscribed by the company in accordance with the Requirements of Writing (Scotland) Act 1995 (c.7),
is sufficient evidence, unless the contrary is shown, of his title to the shares.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 260

Duty of company as to issue of certificates etc on allotment
‘(1) A company must, within two months after the allotment of any of its shares, debentures or debenture stock, complete and have ready for delivery—
(a) the certificates of the shares allotted,
(b) the debentures allotted, or
(c) the certificates of the debenture stock allotted.
(2) Subsection (1) does not apply—
(a) if the conditions of issue of the shares, debentures or debenture stock provide otherwise,
(b) in the case of allotment to a financial institution (see section (Issue of certificates etc: allotment or transfer to financial institution)), or
(c) in the case of an allotment of shares if, following the allotment, the company has issued a share warrant in respect of the shares (see section (Issue and effect of share warrant to bearer)).
(3) If default is made in complying with subsection (1) an offence is committed by every officer of the company who is in default.
(4) A person guilty of an offence under subsection (2) is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 261

Registration of transfer
‘(1) A company may not register a transfer of shares in or debentures of the company unless—
(a) a proper instrument of transfer has been delivered to it, or
(b) the transfer—
(i) is an exempt transfer within the Stock Transfer Act 1982 (c. 41), or
(ii) is in accordance with regulations under Chapter (Evidencing and transfer of title to securities without written instrument) of this Part.
This applies notwithstanding anything in the company’s articles.
(2) Subsection (1) does not affect any power of the company to register as shareholder or debenture holder a person to whom the right to any shares in or debentures of the company has been transmitted by operation of law.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 262

Procedure on transfer being lodged
‘(1) When a transfer of shares in or debentures of a company has been lodged with the company, the company must either—
(a) register the transfer, or
(b) give the transferee notice of refusal to register the transfer, together with its reasons for the refusal,
as soon as practicable and in any event within two months after the date on which the transfer is lodged with it.
(2) If the company refuses to register the transfer, it must provide the transferee with such further information about the reasons for the refusal as the transferee may reasonably request.
This does not include copies of minutes of meetings of directors.
(3) If a company fails to comply with this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(4) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.
(5) This section does not apply—
(a) in relation to a transfer of shares if the company has issued a share warrant in respect of the shares (see section (Issue and effect of share warrant to bearer));
(b) in relation to the transmission of shares or debentures by operation of law.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 263

Transfer of shares on application of transferor
‘On the application of the transferor of any share or interest in a company, the company shall enter in its register of members the name of the transferee in the same manner and subject to the same conditions as if the application for the entry were made by the transferee.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 264

Execution of share transfer by personal representative
‘An instrument of transfer of the share or other interest of a deceased member of a company—
(a) may be made by his personal representative although the personal representative is not himself a member of the company, and
(b) is as effective as if the personal representative had been such a member at the time of the execution of the instrument.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 265

Evidence of grant of probate etc
‘(1) The production to a company of any document that is by law sufficient evidence of the grant of—
(a) probate of the will of a deceased person,
(b) letters of administration of the estate of a deceased person, or
(c) confirmation as executor of a deceased person,
shall be accepted by the company as sufficient evidence of the grant.
(2) This has effect notwithstanding anything in the company’s articles.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 266

Certification of instrument of transfer
‘(1) The certification by a company of an instrument of transfer of any shares in, or debentures of, the company is to be taken as a representation by the company to any person acting on the faith of the certification that there have been produced to the company such documents as on their face show a prima facie title to the shares or debentures in the transferor named in the instrument.
(2) The certification is not to be taken as a representation that the transferor has any title to the shares or debentures.
(3) Where a person acts on the faith of a false certification by a company made negligently, the company is under the same liability to him as if the certification had been made fraudulently.
(4) For the purposes of this section—
(a) an instrument of transfer is certificated if it bears the words “certificate lodged” (or words to the like effect);
(b) the certification of an instrument of transfer is made by a company if—
(i) the person issuing the instrument is a person authorised to issue certificated instruments of transfer on the company’s behalf, and
(ii) the certification is signed by a person authorised to certificate transfers on the company’s behalf or by an officer or employee either of the company or of a body corporate so authorised;
(c) a certification is treated as signed by a person if—
(i) it purports to be authenticated by his signature or initials (whether handwritten or not), and
(ii) it is not shown that the signature or initials was or were placed there neither by himself nor by a person authorised to use the signature or initials for the purpose of certificating transfers on the company’s behalf.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 267

Duty of company as to issue of certificates etc on transfer
‘(1) A company must, within two months after the date on which a transfer of any of its shares, debentures or debenture stock is lodged with the company, complete and have ready for delivery—
(a) the certificates of the shares transferred,
(b) the debentures transferred, or
(c) the certificates of the debenture stock transferred.
(2) For this purpose a “transfer” means—
(a) a transfer duly stamped and otherwise valid, or
(b) an exempt transfer within the Stock Transfer Act 1982 (c. 41),
but does not include a transfer that the company is for any reason entitled to refuse to register and does not register.
(3) Subsection (1) does not apply—
(a) if the conditions of issue of the shares, debentures or debenture stock provide otherwise,
(b) in the case of a transfer to a financial institution (see section (Issue of certificates etc: allotment or transfer to financial institution)), or
(c) in the case of a transfer of shares if, following the transfer, the company has issued a share warrant in respect of the shares (see section (Issue and effect of share warrant to bearer)).
(4) Subsection (1) has effect subject to section (Issue of certificates etc: cases within the Stock Transfer Act 1982) (cases where the Stock Transfer Act 1982 (c.41) applies).
(5) If default is made in complying with subsection (1) an offence is committed by every officer of the company who is in default.
(6) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 268

Issue of certificates etc: cases within the Stock Transfer Act 1982
‘(1) Section (Duty of company as to issue of certificates etc on transfer)(1) (duty of company as to issue of certificates etc on transfer) does not apply in the case of a transfer to a person where, by virtue of regulations under section 3 of the Stock Transfer Act 1982 (c.41), he is not entitled to a certificate or other document of or evidencing title in respect of the securities transferred.
(2) But if in such a case the transferee—
(a) subsequently becomes entitled to such a certificate or other document by virtue of any provision of those regulations, and
(b) gives notice in writing of that fact to the company,
section (Duty of company as to issue of certificates etc on transfer) (duty to company as to issue of certificates etc) has effect as if the reference in subsection (1) of that section to the date of the lodging of the transfer were a reference to the date of the notice.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 269

Issue of certificates etc: allotment or transfer to financial institution
‘(1) A company—
(a) of which shares or debentures are allotted to a financial institution,
(b) of which debenture stock is allotted to a financial institution, or
(c) with which a transfer for transferring shares, debentures or debenture stock to a financial institution is lodged,
is not required in consequence of that allotment or transfer to comply with section (Duty of company as to issue of certificates etc on allotment)(1) or (Duty of company as to issue of certificates etc on transfer)(1) (duty of company as to issue of certificates etc).
(2) A “financial institution” means—
(a) a recognised clearing house acting in relation to a recognised investment exchange, or
(b) a nominee of—
(i) a recognised clearing house acting in that way, or
(ii) a recognised investment exchange,
designated for the purposes of this section in the rules of the recognised investment exchange in question.
(3) Expressions used in subsection (2) have the same meaning as in Part 18 of the Financial Services and Markets Act 2000 (c. 8).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 270

Issue and effect of share warrant to bearer
‘(1) A company limited by shares may, if so authorised by its articles, issue with respect to any fully paid shares a warrant (a “share warrant”) stating that the bearer of the warrant is entitled to the shares specified in it.
(2) A share warrant issued under the company’s common seal or (in the case of a company registered in Scotland) subscribed in accordance with the Requirements of Writing (Scotland) Act 1995 (c.7) entitles the bearer to the shares specified in it and the shares may be transferred by delivery of the warrant.
(3) A company that issues a share warrant may, if so authorised by its articles, provide (by coupons or otherwise) for the payment of the future dividends on the shares included in the warrant.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 271

Duty of company as to issue of certificates on surrender of share warrant
‘(1) A company must, within two months of the surrender of a share warrant for cancellation, complete and have ready for delivery the certificates of the shares specified in the warrant.
(2) Subsection (1) does not apply if the company’s articles provide otherwise.
(3) If default is made in complying with subsection (1) an offence is committed by every officer of the company who is in default.
(4) A person guilty of an offence under subsection (3) is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 272

Offences in connection with share warrants (Scotland)
‘(1) If in Scotland a person—
(a) with intent to defraud, forges or alters, or offers, utters, disposes of, or puts off, knowing the same to be forged or altered, any share warrant or coupon, or any document purporting to be a share warrant or coupon issued in pursuance of this Act, or
(b) by means of any such forged or altered share warrant, coupon or document—
(i) demands or endeavours to obtain or receive any share or interest in a company under this Act, or
(ii) demands or endeavours to receive any dividend or money payment in respect of any such share or interest,
knowing the warrant, coupon or document to be forged or altered,
he commits an offence.
(2) If in Scotland a person without lawful authority or excuse (of which proof lies on him)—
(a) engraves or makes on any plate, wood, stone, or other material, any share warrant or coupon purporting to be—
(i) a share warrant or coupon issued or made by any particular company in pursuance of this Act, or
(ii) a blank share warrant or coupon so issued or made, or
(iii) a part of such a share warrant or coupon, or
(b) uses any such plate, wood, stone, or other material, for the making or printing of any such share warrant or coupon, or of any such blank share warrant or coupon or of any part of such a share warrant or coupon, or
(c) knowingly has in his custody or possession any such plate, wood, stone, or other material,
he commits an offence.
(3) A person guilty of an offence under subsection (1) is liable on summary conviction to imprisonment for a term not exceeding six months or to a fine not exceeding level 5 on the standard scale (or both).
(4) A person guilty of an offence under subsection (2) is liable—
(a) on conviction on indictment, to imprisonment for a term not exceeding seven years or a fine (or both);
(b) on summary conviction, to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum (or both).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 273

Issue of certificates etc: court order to make good default
‘(1) If a company on which a notice has been served requiring it to make good any default in complying with—
(a) section (Duty of company as to issue of certificates etc on allotment)(1) (duty of company as to issue of certificates etc on allotment),
(b) section (Duty of company as to issue of certificates etc on transfer)(1) (duty of company as to issue of certificates etc on transfer), or
(c) section (Duty of company as to issue of certificates etc on surrender of share warrant)(1) (duty of company as to issue of certificates etc on surrender of share warrant),
fails to make good the default within ten days after service of the notice, the person entitled to have the certificates or the debentures delivered to him may apply to the court.
(2) The court may on such an application make an order directing the company and any officer of it to make good the default within such time as may be specified in the order.
(3) The order may provide that all costs (in Scotland, expenses) of and incidental to the application are to be borne by the company or by an officer of it responsible for the default.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 274

Scope of this Chapter
‘In this Chapter—
(a) “securities” means shares, debentures, debenture stock, loan stock, bonds, units of a collective investment scheme within the meaning of the Financial Services and Markets Act 2000 (c. 8) and other securities of any description;
(b) references to title to securities include any legal or equitable interest in securities;
(c) references to a transfer of title include a transfer by way of security;
(d) references to transfer without a written instrument include, in relation to bearer securities, transfer without delivery.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 275

Power to make regulations
‘(1) The power to make regulations under this Chapter is exercisable by the Treasury and the Secretary of State, either jointly or concurrently.
(2) References in this Chapter to the authority having power to make regulations shall accordingly be read as references to both or either of them, as the case may require.
(3) Regulations under this Chapter are subject to affirmative resolution procedure.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 276

Provision enabling procedures for evidencing and transferring title
‘(1) Provision may be made by regulations for enabling title to securities to be evidenced and transferred without a written instrument.
(2) The regulations may make provision—
(a) for procedures for recording and transferring title to securities, and
(b) for the regulation of those procedures and the persons responsible for or involved in their operation.
(3) The regulations must contain such safeguards as appear to the authority making the regulations appropriate for the protection of investors and for ensuring that competition is not restricted, distorted or prevented.
(4) The regulations may, for the purpose of enabling or facilitating the operation of the procedures provided for by the regulations, make provision with respect to the rights and obligations of persons in relation to securities dealt with under the procedures.
(5) The regulations may include provision for the purpose of giving effect to—
(a) the transmission of title to securities by operation of law;
(b) any restriction on the transfer of title to securities arising by virtue of the provisions of any enactment or instrument, court order or agreement;
(c) any power conferred by any such provision on a person to deal with securities on behalf of the person entitled.
(6) The regulations may make provision with respect to the persons responsible for the operation of the procedures provided for by the regulations—
(a) as to the consequences of their insolvency or incapacity, or
(b) as to the transfer from them to other persons of their functions in relation to those procedures.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 277

Provision requiring arrangements to be adopted
‘(1) Regulations under this Chapter may make provision—
(a) enabling the members of a company or of any designated class of companies to adopt, by ordinary resolution, arrangements under which title to securities is required to be evidenced and transferred without a written instrument; or
(b) requiring companies, or any designated class of companies, to adopt such arrangements.
(2) The regulations may make such provision—
(a) in respect of all securities issued by a company, or
(b) in respect of all securities of a specified description.
(3) The arrangements provided for by regulations making such provision as is mentioned in subsection (1) must not be such that a person who, but for the arrangements would be entitled—
(a) to have his name entered in the company’s register of members, or
(b) to give instructions in respect of any securities,
ceases to be so entitled.
(4) The regulations may—
(a) prohibit the issue of any certificate by the company in respect of the issue or transfer of securities,
(b) require the provision by the company to holders of securities of statements (at specified intervals or on specified occasions) of the securities held in their name, and
(c) make provision as to the matters of which any such certificate or statement is, or is not, evidence.
(5) In this section—
(a) references to a designated class of companies are to a class designated in the regulations or by order under section (Provision requiring arrangements to be adopted: order-making powers); and
(b) “specified” means specified in the regulations.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 278

Provision requiring arrangements to be adopted: order-making powers
‘(1) The authority having power to make regulations under this Chapter may by order—
(a) designate classes of companies for the purposes of section (Provision requiring arrangements to be adopted) (provision requiring arrangements to be adopted);
(b) provide that, in relation to securities of a specified description—
(i) in a designated class of companies, or
(ii) in a specified company or class of companies,
specified provisions of regulations made under this Chapter by virtue of that section either do not apply or apply subject to specified modifications.
(2) In subsection (1) “specified” means specified in the order.
(3) An order under this section is subject to negative resolution procedure.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 279

Provision that may be included in regulations
‘Regulations under this Chapter may—
(a) modify or exclude any provision of any enactment or instrument, or any rule of law;
(b) apply, with such modifications as may be appropriate, the provisions of any enactment or instrument (including provisions creating criminal offences);
(c) require the payment of fees, or enable persons to require the payment of fees, of such amounts as may be specified in the regulations or determined in accordance with them;
(d) empower the authority making the regulations to delegate to any person willing and able to discharge them any functions of the authority under the regulations.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 280

Duty to consult
‘Before making—
(a) regulations under this Chapter, or
(b) any order under section (Provision requiring arrangements to be adopted: order making powers),
the authority having power to make regulations under this Chapter must carry out such consultation as appears to it to be appropriate.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 281

Meaning of “distribution”
‘(1) In this Part “distribution” means every description of distribution of a company’s assets to its members, whether in cash or otherwise, subject to the following exceptions.
(2) The following are not distributions for the purposes of this Part—
(a) an issue of shares as fully or partly paid bonus shares;
(b) the reduction of share capital—
(i) by extinguishing or reducing the liability of any of the members on any of the company’s shares in respect of share capital not paid up, or
(ii) by paying off paid up share capital;
(c) the redemption or purchase of any of the company’s own shares out of capital (including the proceeds of any fresh issue of shares) or out of unrealised profits in accordance with Chapter (Redeemable shares) or (Purchase of own shares) of Part (Acquisition by limited company of its own shares);
(d) a distribution of assets to members of the company on its winding up.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 282

Distributions to be made only out of profits available for the purpose
‘(1) A company may only make a distribution out of profits available for the purpose.
(2) A company’s profits available for distribution are its accumulated, realised profits, so far as not previously utilised by distribution or capitalisation, less its accumulated, realised losses, so far as not previously written off in a reduction or reorganisation of capital duly made.
(3) Subsection (2) has effect subject to sections (Distributions by investment companies out of accumulated revenue profits) and (Power to extend provisions relating to investment companies) (investment companies etc: distributions out of accumulated revenue profits).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 283

Net asset restriction on distributions by public companies
‘(1) A public company may only make a distribution—
(a) if the amount of its net assets is not less than the aggregate of its called-up share capital and undistributable reserves, and
(b) if, and to the extent that, the distribution does not reduce the amount of those assets to less than that aggregate.
(2) For this purpose a company’s “net assets” means the aggregate of the company’s assets less the aggregate of its liabilities.
(3) “Liabilities” here includes—
(a) where the relevant accounts are Companies Act accounts, provisions of a kind specified for the purposes of this subsection by regulations under section 378;
(b) where the relevant accounts are IAS accounts, provisions of any kind.
(4) A company’s undistributable reserves are—
(a) its share premium account;
(b) its capital redemption reserve;
(c) the amount by which its accumulated, unrealised profits (so far as not previously utilised by capitalisation) exceed its accumulated, unrealised losses (so far as not previously written off in a reduction or reorganisation of capital duly made);
(d) any other reserve that the company is prohibited from distributing—
(i) by any enactment (other than one contained in this Part), or
(ii) by its articles.
The reference in paragraph (c) to capitalisation does not include a transfer of profits of the company to its capital redemption reserve.
(5) A public company must not include any uncalled share capital as an asset in any accounts relevant for purposes of this section.
(6) Subsection (1) has effect subject to sections (Distributions by investment companies out of accumulated revenue profits) and (Power to extend provisions relating to investment companies) (investment companies etc: distributions out of accumulated revenue profits).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 284

Distributions by investment companies out of accumulated revenue profits
‘(1) An investment company may make a distribution out of its accumulated, realised revenue profits if the following conditions are met.
(2) It may make such a distribution only if, and to the extent that, its accumulated, realised revenue profits, so far as not previously utilised by a distribution or capitalisation, exceed its accumulated revenue losses (whether realised or unrealised), so far as not previously written off in a reduction or reorganisation of capital duly made.
(3) It may make such a distribution only—
(a) if the amount of its assets is at least equal to one and a half times the aggregate of its liabilities, and
(b) if, and to the extent that, the distribution does not reduce that amount to less than one and a half times that aggregate.
(4) For this purpose a company’s liabilities include—
(a) in the case of Companies Act accounts, provisions of a kind specified for the purposes of this subsection by regulations under section 378;
(b) in the case of IAS accounts, provisions of any kind.
(5) The following conditions must also be met—
(a) the company’s shares must be listed on a recognised UK investment exchange;
(b) during the relevant period it must not have—
(i) distributed any capital profits otherwise than by way of the redemption or purchase of any of the company’s own shares in accordance with Chapter (Redeemable shares) or (Purchase of own shares) of Part (Acquisition by limited company of its own shares), or
(ii) applied any unrealised profits or any capital profits (realised or unrealised) in paying up debentures or amounts unpaid on its issued shares;
(c) it must have given notice to the registrar under section (Meaning of “investment company”)(1) (notice of intention to carry on business as an investment company)—
(i) before the beginning of the relevant period, or
(ii) as soon as reasonably practicable after the date of its incorporation.
(6) For the purposes of this section—
(a) “recognised UK investment exchange” means a recognised investment exchange within the meaning of Part 18 of the Financial Services and Markets Act 2000 (c. 8), other than an overseas investment exchange within the meaning of that Part; and
(b) the “relevant period” is the period beginning with—
(i) the first day of the accounting reference period immediately preceding that in which the proposed distribution is to be made, or
(ii) where the distribution is to be made in the company’s first accounting reference period, the first day of that period,
and ending with the date of the distribution.
(7) The company must not include any uncalled share capital as an asset in any accounts relevant for purposes of this section.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 285

Meaning of “investment company”
‘(1) In this Part an “investment company” means a public company that—
(a) has given notice (which has not been revoked) to the registrar of its intention to carry on business as an investment company, and
(b) since the date of that notice has complied with the following requirements.
(2) Those requirements are—
(a) that the business of the company consists of investing its funds mainly in securities, with the aim of spreading investment risk and giving members of the company the benefit of the results of the management of its funds;
(b) that the condition in section (Investment company: condition as to holdings in other companies) is met as regards holdings in other companies;
(c) that distribution of the company’s capital profits is prohibited by its articles of association;
(d) that the company has not retained, otherwise than in compliance with this Part, in respect of any accounting reference period more than 15% of the income it derives from securities.
(3) Subsection (2)(c) does not require an investment company to be prohibited by its articles from redeeming or purchasing its own shares in accordance with Chapter (Redeemable shares) or (Purchase of own shares) of Part (Acquisition by limited company of its own shares) out of its capital profits.)
(4) Notice to the registrar under this section may be revoked at any time by the company on giving notice to the registrar that it no longer wishes to be an investment company within the meaning of this section.
(5) On giving such a notice, the company ceases to be such a company.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 286

Investment company: condition as to holdings in other companies
‘(1) The condition referred to in section (Meaning of “investment company”)(2)(b) (requirements to be complied with by investment company) is that none of the company’s holdings in companies (other than those that are for the time being investment companies) represents more than 15% by value of the company’s investments.
(2) For this purpose—
(a) holdings in companies that—
(i) are members of a group (whether or not including the investing company), and
(ii) are not for the time being investment companies,
are treated as holdings in a single company; and
(b) where the investing company is a member of a group, money owed to it by another member of the group—
(i) is treated as a security of the latter held by the investing company, and
(ii) is accordingly treated as, or as part of, the holding of the investing company in the company owing the money.
(3) The condition does not apply—
(a) to a holding in a company acquired before 6th April 1965 that on that date represented not more than 25% by value of the investing company’s investments, or
(b) to a holding in a company that, when it was acquired, represented not more than 15% of the investing company’s investments,
so long as no addition is made to the holding.
(4) For the purposes of subsection (3)—
(a) “holding” means the shares or securities (whether or one class or more than one class) held in any one company;
(b) an addition is made to a holding whenever the investing company acquires shares or securities of that one company, otherwise than by being allotted shares or securities without becoming liable to give any consideration, and if an addition is made to a holding that holding is acquired when the addition or latest addition is made to the holding; and
(c) where in connection with a scheme of reconstruction a company issues shares or securities to persons holding shares or securities in a second company in respect of and in proportion to (or as nearly as may be in proportion to) their holdings in the second company, without those persons becoming liable to give any consideration, a holding of the shares or securities in the second company and a corresponding holding of the shares or securities so issued shall be regarded as the same holding.
(5) In this section—
“company” and “shares” shall be construed in accordance with sections 99 and 288 of the Taxation of Chargeable Gains Act 1992 (c. 12);
“group” means a company and all companies that are its 51% subsidiaries (within the meaning of section 838 of the Income and Corporation Taxes Act 1988 (c.1); and
“scheme of reconstruction” has the same meaning as in section 136 of the Taxation of Chargeable Gains Act 1992 (c.12).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 287

Power to extend provisions relating to investment companies
‘(1) The Secretary of State may by regulations extend the provisions of sections (Distributions by investment companies out of accumulated revenue profits) to (Investment company: condition as to holdings in other companies) (distributions by investment companies out of accumulated profits), with or without modifications, to other companies whose principal business consists of investing their funds in securities, land or other assets with the aim of spreading investment risk and giving their members the benefit of the results of the management of the assets.
(2) Regulations under this section are subject to affirmative resolution procedure.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 288

Justification of distribution by reference to relevant accounts
‘(1) Whether a distribution may be made by a company without contravening this Part, and the amount of a distribution that may be so made, is determined by reference to the following items as stated in the relevant accounts—
(a) profits, losses, assets and liabilities;
(b) provisions of the following kinds—
(i) where the relevant accounts are Companies Act accounts, provisions of a kind specified for the purposes of this subsection by regulations under section 378;
(ii) where the relevant accounts are IAS accounts, provisions of any kind;
(c) share capital and reserves (including undistributable reserves).
(2) The relevant accounts are the company’s last annual accounts, except that—
(a) where the distribution would be found to contravene this Part by reference to the company’s last annual accounts, it may be justified by reference to interim accounts, and
(b) where the distribution is proposed to be declared during the company’s first accounting reference period, or before any accounts have been circulated in respect of that period, it may be justified by reference to initial accounts.
(3) The requirements of—
section (Requirements where last annual accounts used) (as regards the company’s last annual accounts),
section (Requirements where interim accounts used) (as regards interim accounts), and
section (Requirements where initial accounts used) (as regards initial accounts),
must be complied with, as and where applicable.
(4) If any applicable requirement of those sections is not complied with, the accounts may not be relied on for the purposes of this Part and the distribution is accordingly treated as contravening this Part.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 289

Requirements where last annual accounts used
‘(1) The company’s last annual accounts means the company’s individual accounts—
(a) that were last circulated to members in accordance with section 405 (duty to circulate copies of annual accounts and reports), or
(b) if in accordance with section 408 the company provided a summary financial statement instead, that formed the basis of that statement.
(2) The accounts must have been properly prepared in accordance with this Act, or have been so prepared subject only to matters that are not material for determining (by reference to the items mentioned in section (Justification of distribution by reference to relevant accounts)(1)) whether the distribution would contravene this Part.
(3) Unless the company is exempt from audit and the directors take advantage of that exemption, the auditor must have made his report on the accounts.
(4) If that report was qualified—
(a) the auditor must have stated in writing (either at the time of their report or subsequently) whether in his opinion the matters in respect of which his report is qualified are material for determining whether a distribution would contravene this Part, and
(b) a copy of that statement must—
(i) in the case of a private company, have been circulated to members in accordance with section 405, or
(ii) in the case of a public company have been laid before the company in general meeting.
(5) An auditor’s statement is sufficient for the purposes of a distribution if it relates to distributions of a description that includes the distribution in question, even if at the time of the statement it had not been proposed.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 290

Requirements where interim accounts used
‘(1) Interim accounts must be accounts that enable a reasonable judgment to be made as to the amounts of the items mentioned in section (Justification of distribution by reference to relevant accounts)(1)
(2) Where interim accounts are prepared for a proposed distribution by a public company, the following requirements apply.
(3) The accounts must have been properly prepared, or have been so prepared subject to matters that are not material for determining (by reference to the items mentioned in section (Justification of distribution by reference to relevant accounts)(1)) whether the distribution would contravene this Part.
(4) “Properly prepared” means prepared in accordance with sections 377 to 379 (requirements for company individual accounts), applying those requirements with such modifications as are necessary because the accounts are prepared otherwise than in respect of an accounting reference period.
(5) The balance sheet comprised in the accounts must have been signed in accordance with section 396.
(6) A copy of the accounts must have been delivered to the registrar of companies.
Any requirement of Part 29 of this Act as to the delivery of a certified translation into English of any document forming part of the accounts must also have been met.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 291

Requirements where initial accounts used
‘(1) Initial accounts must be accounts that enable a reasonable judgment to be made as to the amounts of the items mentioned in section (Justification of distribution by reference to relevant accounts)(1).
(2) Where initial accounts are prepared for a proposed distribution by a public company, the following requirements apply.
(3) The accounts must have been properly prepared, or have been so prepared subject to matters that are not material for determining (by reference to the items mentioned in section (Justification of distribution by reference to relevant accounts)(1)) whether the distribution would contravene this Part.
(4) “Properly prepared” means prepared in accordance with sections 377 to 379 (requirements for company individual accounts), applying those requirements with such modifications as are necessary because the accounts are prepared otherwise than in respect of an accounting reference period.
(5) The company’s auditor must have made a report stating whether, in his opinion, the accounts have been properly prepared.
(6) If that report was qualified—
(a) the auditor must have stated in writing (either at the time of his report or subsequently) whether in his opinion the matters in respect of which his report is qualified are material for determining whether a distribution would contravene this Part, and
(b) a copy of that statement must—
(i) in the case of a private company, have been circulated to members in accordance with section 405, or
(ii) in the case of a public company have been laid before the company in general meeting.
(7) A copy of the accounts, of the auditor’s report and of any auditor’s statement must have been delivered to the registrar.
Any requirement of Part 29 of this Act as to the delivery of a certified translation into English of any of those documents must also have been met.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 292

Successive distributions etc by reference to the same accounts
‘(1) In determining whether a proposed distribution may be made by a company in a case where—
(a) one or more previous distributions have been made in pursuance of a determination made by reference to the same relevant accounts, or
(b) relevant financial assistance has been given, or other relevant payments have been made, since those accounts were prepared,
the provisions of this Part apply as if the amount of the proposed distribution was increased by the amount of the previous distributions, financial assistance and other payments.
(2) The financial assistance and other payments that are relevant for this purpose are—
(a) financial assistance lawfully given by the company out of its distributable profits;
(b) financial assistance given by the company in contravention of section (Assistance for acquisition of shares in public company) or (Assistance by public company for acquisition of shares in its private holding company) (prohibited financial assistance) in a case where the giving of that assistance reduces the company’s net assets or increases its net liabilities;
(c) payments made by the company in respect of the purchase by it of shares in the company, except a payment lawfully made otherwise than out of distributable profits;
(d) payments of any description specified in section (Payments apart from purchase price to be made out of distributable profits) (payments apart from purchase price of shares to be made out of distributable profits).
(3) In this section “financial assistance” has the same meaning as in Chapter (Financial assistance for purchase of own shares) of Part (Acquisition by limited company of own shares) (see section (Definitions for this Chapter)).
(4) For the purpose of applying subsection (2)(b) in relation to any financial assistance—
(a) “net assets” means the amount by which the aggregate amount of the company’s assets exceeds the aggregate amount of its liabilities, and
(b) “net liabilities” means the amount by which the aggregate amount of the company’s liabilities exceeds the aggregate amount of its assets,
taking the amount of the assets and liabilities to be as stated in the company’s accounting records immediately before the financial assistance is given.
(5) For this purpose a company’s liabilities include any amount retained as reasonably necessary for the purposes of providing for any liability—
(a) the nature of which is clearly defined, and
(b) which is either likely to be incurred or certain to be incurred but uncertain as to amount or as to the date on which it will arise.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 293

Realised losses and profits and revaluation of fixed assets
‘(1) The following provisions have effect for the purposes of this Part.
(2) The following are treated as realised losses—
(a) in the case of Companies Act accounts, provisions of a kind specified for the purposes of this paragraph by regulations under section 378 (except revaluation provisions);
(b) in the case of IAS accounts, provisions of any kind (except revaluation provisions).
(3) A “revaluation provision” means a provision in respect of a diminution in value of a fixed asset appearing on a revaluation of all the fixed assets of the company, or of all of its fixed assets other than goodwill.
(4) Where—
(a) on the revaluation of a fixed asset, an unrealised profit is shown to have been made, and
(b) on or after the revaluation, a sum is written off or retained for depreciation of that asset over a period,
an amount equal to the amount by which that sum exceeds the sum which would have been so written off or retained for the depreciation of that asset over that period, if that profit had not been made, is treated as a realised profit made over that period.
(5) For the purpose of this section there is treated as having been a revaluation where—
(a) the directors have considered the value of fixed assets of the company, without actually revaluing them, and
(b) they are satisfied that their aggregate value at the time of their consideration was not less than the aggregate amount at which they were then stated in the company’s accounts.
(6) Where the relevant accounts are required to be prepared in accordance with this Act, subsection (5) applies only if it is stated in a note to the accounts—
(a) that the directors have considered the value of fixed assets of the company without actually revaluing them,
(b) that they are satisfied that the aggregate value of those assets at the time of their consideration was not less than the aggregate amount at which they were then stated in the company’s accounts, and
(c) that accordingly, by virtue of that subsection, amounts are stated in the accounts on the basis that a revaluation of fixed assets of the company is treated as having taken place at that time.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 294

Determination of profit or loss in respect of asset where records incomplete
In determining for the purposes of this Part whether a company has made a profit or loss in respect of an asset where—
(a) there is no record of the original cost of the asset, or
(b) a record cannot be obtained without unreasonable expense or delay, then,
its cost is taken to be the value ascribed to it in the earliest available record of its value made on or after its acquisition by the company.’.—[Margaret Hodge.]

Brought up, read the First time and Second time, and added to the Bill.

New Clause 295

Realised profits and losses of long term insurance business
‘(1) The provisions of this section have effect for the purposes of this Part as it applies in relation to an authorised insurance company carrying on long term business.
(2) An amount included in the relevant part of the company’s balance sheet that—
(a) represents a surplus in the fund or funds maintained by it in respect of its long term business, and
(b) has not been allocated to policy holders or, as the case may be, carried forward unappropriated in accordance with asset identification rules made under section 142(2) of the Financial Services and Markets Act 2000 (c. 8),
is treated as a realised profit.
(3) For the purposes of subsection (2)—
(a) the relevant part of the balance sheet is that part of the balance sheet that represents accumulated profit or loss;
(b) a surplus in the fund or funds maintained by the company in respect of its long term business means an excess of the assets representing that fund or those funds over the liabilities of the company attributable to its long term business, as shown by an actuarial investigation.
(4) A deficit in the fund or funds maintained by the company in respect of its long term business is treated as a realised loss.
For this purpose a deficit in any such fund or funds means an excess of the liabilities of the company attributable to its long term business over the assets representing that fund or those funds, as shown by an actuarial investigation.
(5) Subject to subsections (2) and (4), any profit or loss arising in the company’s long term business is to be left out of account.
(6) For the purposes of this section an “actuarial investigation” means an investigation made into the financial condition of an authorised insurance company in respect of its long term business—
(a) carried out once in every period of twelve months in accordance with rules made under Part 10 of the Financial Services and Markets Act 2000 (c.8), or
(b) carried out in accordance with a requirement imposed under section 166 of that Act,]
by an actuary appointed as actuary to the company.
(7) In this section “long term business” means business that consists of effecting or carrying out contracts of long term insurance.
This definition must be read with section 22 of the Financial Services and Markets Act 2000 (c.8), any relevant order under that section and Schedule 2 to that Act.’.]—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 296

Treatment of development costs
‘(1) Where development costs are shown as an asset in a company’s accounts, any amount shown in respect of those costs is treated—
(a) for the purposes of section (Distributions to be made only out of profits available for the purpose) (distributions to be made out of profits available for the purpose) as a realised loss, and
(b) for the purposes of section (Distributions by investment companies out of accumulated revenue profits) (distributions by investment companies out of accumulated revenue profits) as a realised revenue loss.
This is subject to the following exceptions.
(2) Subsection (1) does not apply to any part of that amount representing an unrealised profit made on revaluation of those costs.
(3) Subsection (1) does not apply if—
(a) there are special circumstances in the company’s case justifying the directors in deciding that the amount there mentioned is not to be treated as required by subsection (1),
(b) it is stated—
(i) in the case of Companies Act accounts, in the note required by regulations under section 378 as to the reasons for showing development costs as an asset, or
(ii) in the case of IAS accounts, in any note to the accounts,
that the amount is not to be so treated, and
(c) the note explains the circumstances relied upon to justify the decision of the directors to that effect.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 297

Distributions in kind: determination of amount
‘(1) This section applies for determining the amount of a distribution consisting of or including, or treated as arising in consequence of, the sale, transfer or other disposition by a company of a non-cash asset where—
(a) at the time of the distribution the company has profits available for distribution, and
(b) if the amount of the distribution were to be determined in accordance with this section, the company could make the distribution without contravening this Part.
(2) The amount of the distribution (or the relevant part of it) is taken to be—
(a) in a case where the amount or value of the consideration for the disposal is not less than the book value of the asset, zero;
(b) in any other case, the amount by which the book value of the asset exceeds the amount or value of any consideration for the disposal.
(3) The company’s profits available for distribution are treated as increased by the amount (if any) by which the amount or value of any consideration for the disposition exceeds the book value of the asset.
(4) In this section “book value”, in relation to an asset, means—
(a) the amount at which the asset is stated in the relevant accounts, or
(b) where the asset is not stated in those accounts at any amount, zero.
(5) The provisions of Chapter (Justification of distribution by reference to accounts) (justification of distribution by reference to accounts) have effect subject to this section.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 298

Distributions in kind: treatment of unrealised profits
‘(1) This section applies where—
(a) a company makes a distribution consisting of or including, or treated as arising in consequence of, the sale, transfer or other disposition by the company of a non-cash asset, and
(b) any part of the amount at which that asset is stated in the relevant accounts represents an unrealised profit.
(2) That profit is treated as a realised profit—
(a) for the purpose of determining the lawfulness of the distribution in accordance with this Part (whether before or after the distribution takes place), and
(b) for the purpose of the application, in relation to anything done with a view to or in connection with the making of the distribution, of any provision of regulations under section 378 under which only realised profits are to be included in or transferred to the profit and loss account.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 299

Consequences of unlawful distribution
‘(1) This section applies where a distribution, or part of one, made by a company to one of its members is made in contravention of this Part.
(2) If at the time of the distribution the member knows or has reasonable grounds for believing that it is so made, he is liable—
(a) to repay it (or that part of it, as the case may be) to the company, or
(b) in the case of a distribution made otherwise than in cash, to pay the company a sum equal to the value of the distribution (or part) at that time.
(3) This is without prejudice to any obligation imposed apart from this section on a member of a company to repay a distribution unlawfully made to him.
(4) This section does not apply in relation to—
(a) financial assistance given by a company in contravention of section (Assistance for acquisition of shares in public company) or (Assistance by public company for acquisition of shares in its private holding company), or
(b) any payment made by a company in respect of the redemption or purchase by the company of shares in itself.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 300

Saving for certain older provisions in articles
‘(1) Where immediately before the relevant date a company was authorised by a provision of its articles to apply its unrealised profits in paying up in full or in part unissued shares to be allotted to members of the company as fully or partly paid bonus shares, that provision continues (subject to any alteration of the articles) as authority for those profits to be so applied after that date.
(2) For this purpose the relevant date is—
(a) for companies registered in Great Britain, 22nd December 1980;
(b) for companies registered in Northern Ireland, 1st July 1983.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 301

Restriction on application of unrealised profits
‘A company must not apply an unrealised profit in paying up debentures or any amounts unpaid on its issued shares.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 302

Treatment of certain older profits or losses
‘(1) Where the directors of a company are, after making all reasonable enquiries, unable to determine whether a particular profit made before the relevant date is realised or unrealised, they may treat the profit as realised.
(2) Where the directors of a company, after making all reasonable enquiries, are unable to determine whether a particular loss made before the relevant date is realised or unrealised, they may treat the loss as unrealised.
(3) For the purposes of this section the relevant date is—
(a) for companies registered in Great Britain, 22nd December 1980;
(b) for companies registered in Northern Ireland, 1st July 1983.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 303

Application of rules of law restricting distributions
‘(1) Except as provided in this section, the provisions of this Part are without prejudice to any rule of law restricting the sums out of which, or the cases in which, a distribution may be made.
(2) For the purposes of any rule of law requiring distributions to be paid out of profits or restricting the return of capital to members—
(a) section (Distributions in kind: determination of amount) (distributions in kind: determination of amount) applies to determine the amount of any distribution or return of capital consisting of or including, or treated as arising in consequence of the sale, transfer or other disposition by a company of a non-cash asset; and
(b) section (Distributions in kind: treatment of unrealised profits) (distributions in kind: treatment of unrealised profits) applies as it applies for the purposes of this Part.
(3) In this section references to distributions are to amounts regarded as distributions for the purposes of any such rule of law as is referred to in subsection (1).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 304

Saving for other restrictions on distributions
‘The provisions of this Part are without prejudice to any enactment, or any provision of a company’s articles, restricting the sums out of which, or the cases in which, a distribution may be made.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 305

Minor definitions
‘(1) The following provisions apply for the purposes of this Part.
(2) References to profit or losses of any description—
(a) are to profits or losses of that description made at any time, and
(b) except where the context otherwise requires, are to profits or losses of a revenue or capital character.
(3) “Capitalisation”, in relation to a company’s profits, means any of the following operations (whenever carried out)—
(a) applying the profits in wholly or partly paying up unissued shares in the company to be allotted to members of the company as fully or partly paid bonus shares, or
(b) transferring the profits to capital redemption reserve.
(4) References to “realised profits” and “realised losses”, in relation to a company’s accounts, are to such profits or losses of the company as fall to be treated as realised in accordance with principles generally accepted at the time when the accounts are prepared, with respect to the determination for accounting purposes of realised profits or losses.
(5) Subsection (4) is without prejudice to—
(a) the construction of any other expression (where appropriate) by reference to accepted accounting principles or practice, or
(b) any specific provision for the treatment of profits or losses of any description as realised.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 306

General power to make further provision by regulations
‘(1) The Secretary of State may by regulations modify the provisions of this Part.
(2) The regulations may—
(a) amend or repeal any of the provisions of this Part, or
(b) make such other provision as appears to the Secretary of State appropriate in place of any of the provisions of this Part.
(3) Regulations under this section may make consequential amendments or repeals in other provisions of this Act, or in other enactments.
(4) Regulations under this section are subject to affirmative resolution procedure.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 307

Charges created by a company
‘(1) A company that creates a charge to which this section applies must deliver the prescribed particulars of the charge, together with the instrument (if any) by which the charge is created or evidenced, to the registrar for registration before the end of the period allowed for registration.
(2) Registration of a charge to which this section applies may instead be effected on the application of a person interested in it.
(3) Where registration is effected on the application of some person other than the company, that person is entitled to recover from the company the amount of any fees properly paid by him to the registrar on registration.
(4) If a company fails to comply with subsection (1), an offence is committed by—
(a) the company, and
(b) every officer of it who is in default.
(5) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine, and
(b) on summary conviction, to a fine not exceeding the statutory maximum.
(6) Subsection (4) does not apply if registration of the charge has been effected on the application of some other person.
(7) This section applies to the following charges—
(a) a charge on land or any interest in land, other than a charge for any rent or other periodical sum issuing out of land,
(b) a charge created or evidenced by an instrument which, if executed by an individual, would require registration as a bill of sale,
(c) a charge for the purposes of securing any issue of debentures,
(d) a charge on uncalled share capital of the company,
(e) a charge on calls made but not paid,
(f) a charge on book debts of the company,
(g) a floating charge on the company’s property or undertaking,
(h) a charge on a ship or aircraft, or any share in a ship,
(i) a charge on goodwill or on any intellectual property.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 308

Charges which have to be registered: supplementary
‘(1) The holding of debentures entitling the holder to a charge on land is not, for the purposes of section (Charges created by a company)(7)(a), an interest in the land.
(2) It is immaterial for the purposes of this Chapter where land subject to a charge is situated.
(3) The deposit by way of security of a negotiable instrument given to secure the payment of book debts is not, for the purposes of section (Charges created by a company)(7)(f), a charge on those book debts.
(4) For the purposes of section (Charges created by a company)(7)(i), “intellectual property” means—
(a) any patent, trade mark, registered design, copyright or design right;
(b) any licence under or in respect of any such right.
(5) In this Chapter—
“charge” includes mortgage, and
“company” means a company registered in England and Wales or in Northern Ireland.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 309

Charges existing on property acquired
‘(1) This section applies where a company acquires property which is subject to a charge of a kind which would, if it had been created by the company after the acquisition of the property, have been required to be registered under this Chapter.
(2) The company must deliver the prescribed particulars of the charge, together with a certified copy of the instrument (if any) by which the charge is created or evidenced, to the registrar for registration.
(3) Subsection (2) must be complied with before the end of the period allowed for registration.
(4) If default is made in complying with this section, an offence is committed by—
(a) the company, and
(b) every officer of it who is in default.
(5) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine, and
(b) on summary conviction, to a fine not exceeding the statutory maximum.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 310

Charge in series of debentures
‘(1) Where a series of debentures containing, or giving by reference to another instrument, any charge to the benefit of which debenture holders of that series are entitled pari passu is created by a company, it is for the purposes of section (Charges created by a company)(1) sufficient if the required particulars, together with the deed containing the charge (or, if there is no such deed, one of the debentures of the series), are delivered to the registrar before the end of the period allowed for registration.
(2) The following are the required particulars—
(a) the total amount secured by the whole series, and
(b) the dates of the resolutions authorising the issue of the series and the date of the covering deed (if any) by which the series is created or defined, and
(c) a general description of the property charged, and
(d) the names of the trustees (if any) for the debenture holders.
(3) Particulars of the date and amount of each issue of debentures of a series of the kind mentioned in subsection (1) must be sent to the registrar for entry in the register of charges.
(4) Failure to comply with subsection (3) does not affect the validity of the debentures issued.
(5) Subsections (2) to (6) of section (Charges created by a company) apply for the purposes of this section as they apply for the purposes of that section, but as if references to the registration of the charge were a reference to the registration of the series of debentures.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 311

Additional registration requirement for commission etc. in relation to debentures
‘(1) Where any commission, allowance or discount has been paid or made either directly or indirectly by a company to a person in consideration of his—
(a) subscribing or agreeing to subscribe, whether absolutely or conditionally, for debentures in a company, or
(b) procuring or agreeing to procure subscriptions, whether absolute or conditional, for such debentures,
the particulars required to be sent for registration under section (Charges created by a company) shall include particulars as to the amount or rate per cent. of the commission, discount or allowance so paid or made.
(2) The deposit of debentures as security for a debt of the company is not, for the purposes of this section, treated as the issue of debentures at a discount.
(3) Failure to comply with this section does not affect the validity of the debentures issued.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 312

Endorsement of certificate on debentures
‘(1) The company shall cause a copy of every certificate of registration given under section (Register of charges to be kept by registrar) to be endorsed on every debenture or certificate of debenture stock which is issued by the company, and the payment of which is secured by the charge so registered.
(2) But this does not require a company to cause a certificate of registration of any charge so given to be endorsed on any debenture or certificate of debenture stock issued by the company before the charge was created.
(3) If a person knowingly and wilfully authorises or permits the delivery of a debenture or certificate of debenture stock which under this section is required to have endorsed on it a copy of a certificate of registration, without the copy being so endorsed upon it, he commits an offence.
(4) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 313

Charges created in, or over property in, jurisdictions outside the United Kingdom
‘(1) Where a charge is created outside the United Kingdom comprising property situated outside the United Kingdom, the delivery to the registrar of a verified copy of the instrument by which the charge is created or evidenced has the same effect for the purposes of this Chapter as the delivery of the instrument itself.
(2) Where a charge is created in the United Kingdom but comprises property outside the United Kingdom, the instrument creating or purporting to create the charge may be sent for registration under section (Charges created by a company) even if further proceedings may be necessary to make the charge valid or effectual according to the law of the country in which the property is situated.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 314

Charges over property in another United Kingdom jurisdiction
‘(1) Subsection (2) applies where—
(a) a charge comprises property situated in a part of the United Kingdom other than the part in which the company is registered, and
(b) registration in that other part is necessary to make the charge valid or effectual under the law of that part of the United Kingdom.
(2) The delivery to the registrar of a verified copy of the instrument by which the charge is created or evidenced, together with a certificate stating that the charge was presented for registration in that other part of the United Kingdom on the date on which it was so presented has, for the purposes of this Chapter, the same effect as the delivery of the instrument itself.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 315

Northern Ireland: registration of certain charges etc., affecting land
‘(1) Where a charge imposed by an order under Article 46 of the 1981 Order or notice of such a charge is registered in the Land Registry against registered land or any estate in registered land of a company, the Registrar of Titles shall as soon as may be cause 2 copies of the order made under Article 46 of that Order or of any notice under Article 48 of that Order to be delivered to the registrar.
(2) Where a charge imposed by an order under Article 46 of the 1981 Order is registered in the Registry of Deeds against any unregistered land or estate in land of a company, the Registrar of Deeds shall as soon as may be cause 2 copies of the order to be delivered to the registrar.
(3) On delivery of copies under this section, the registrar shall—
(a) register one of them in accordance with section (Register of charges to be kept by registrar), and
(b) not later than 7 days from that date of delivery, cause the other copy together with a certificate of registration under section (Register of charges to be kept by registrar)(5) to be sent to the company against which judgment was given.
(4) Where a charge to which subsection (1) or (2) applies is vacated, the Registrar of Titles or, as the case may be, the Registrar of Deeds shall cause a certified copy of the certificate of satisfaction lodged under Article 132(1) of the 1981 Order to be delivered to the registrar for entry of a memorandum of satisfaction in accordance with section (Entries of release and satisfaction).
(5) In this section—
“the 1981 Order” means the Judgments Enforcement (Northern Ireland) Order 1981;
“the Registrar of Deeds” means the registrar appointed under the Registration of Deeds Act (Northern Ireland) 1970,
“Registry of Deeds” has the same meaning as in the Registration of Deeds Acts,
“Registration of Deeds Acts” means the Registration of Deeds (Northern Ireland) 1970 (c. 25) and every statutory provision for the time being in force amending that Act or otherwise relating to the registry of deeds, or the registration of deeds, orders or other instruments or documents in such registry,
“the Land Registry” and “the Registrar of Titles” are to be construed in accordance with section 1 of the Land Registration Act (Northern Ireland) 1970 (c. 18),
“registered land” and “unregistered land” have the same meaning as in Part 3 of the Land Registration Act (Northern Ireland) 1970.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 316

Register of charges to be kept by registrar
‘(1) The registrar shall keep, with respect to each company, a register of all the charges requiring registration under this Chapter.
(2) In the case of a charge to the benefit of which holders of a series of debentures are entitled, the registrar shall enter in the register the required particulars specified in section (Charge in series of debentures)(2).
(3) In the case of a charge imposed by the Enforcement of Judgments Office under Article 46 of the Judgments Enforcement (Northern Ireland) 1981, the registrar shall enter in the register the date on which the charge became effective.
(4) In the case of any other charge, the registrar shall enter in the register the following particulars—
(a) if it is a charge created by a company, the date of its creation and, if it is a charge which was existing on property acquired by the company, the date of the acquisition,
(b) the amount secured by the charge,
(c) short particulars of the property charged, and
(d) the persons entitled to the charge.
(5) The registrar shall give a certificate of the registration of any charge registered in pursuance of this Chapter, stating the amount secured by the charge.
(6) The certificate—
(a) shall be signed by the registrar or authenticated by the registrar’s official seal, and
(b) is conclusive evidence that the requirements of this Chapter as to registration have been satisfied.
(7) The register kept in pursuance of this section shall be open to inspection by any person.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 317

The period allowed for registration
‘(1) The period allowed for registration of a charge created by a company is—
(a) 21 days beginning with the day after the day on which the charge is created, or
(b) if the charge is created outside the United Kingdom, 21 days beginning with the day after the day on which the instrument by which the charge is created or evidenced (or a copy of it) could, in due course of post (and if despatched with due diligence) have been received in the United Kingdom.
(2) The period allowed for registration of a charge to which property acquired by a company is subject is—
(a) 21 days beginning with the day after the day on which the acquisition is completed, or
(b) if the property is situated and the charge was created outside the United Kingdom, 21 days beginning with the day after the day on which the instrument by which the charge is created or evidenced (or a copy of it) could, in due course of post (and if despatched with due diligence) have been received in the United Kingdom.
(3) The period allowed for registration of particulars of a series of debentures as a result of section (Charge in series of debentures) is—
(a) if there is a deed containing the charge mentioned in section (Charge in series of debentures)(1), 21 days beginning with the day after the day on which that deed is executed, or
(b) if there is no such deed, 21 days beginning with the day after the day on which the first debenture of the series is executed.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 318

Registration of enforcement of security
‘(1) If a person obtains an order for the appointment of a receiver or manager of a company’s property, or appoints such a receiver or manager under powers contained in an instrument, he shall within 7 days of the order or of the appointment under those powers, give notice of the fact to the registrar.
(2) Where a person appointed receiver or manager of a company’s property under powers contained in an instrument ceases to act as such receiver or manager, he shall, on so ceasing, give the registrar notice to that effect.
(3) The registrar must enter a fact of which he is given notice under this section in the register of charges.
(4) A person who makes default in complying with the requirements of this section commits an offence.
(5) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, to a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 319

Entries of satisfaction and release
‘(1) Subsection (2) applies if a statement is delivered to the registrar verifying with respect to a registered charge—
(a) that the debt for which the charge was given has been paid or satisfied in whole or in part, or
(b) that part of the property or undertaking charged has been released from the charge or has ceased to form part of the company’s property or undertaking.
(2) The registrar may enter on the register a memorandum of satisfaction in whole or in part, or of the fact part of the property or undertaking has been released from the charge or has ceased to form part of the company’s property or undertaking (as the case may be).
(3) Where the registrar enters a memorandum of satisfaction in whole, the registrar shall if required send the company a copy of it.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 320

Rectification of register of charges
‘(1) Subsection (2) applies if the court is satisfied—
(a) that the failure to register a charge before the end of the period allowed for registration, or the omission or mis-statement of any particular with respect to any such charge or in a memorandum of satisfaction—
(i) was accidental or due to inadvertence or to some other sufficient cause, or
(ii) is not of a nature to prejudice the position of creditors or shareholders of the company, or
(b) that on other grounds it is just and equitable to grant relief.
(2) The court may, on the application of the company or a person interested, and on such terms and conditions as seem to the court just and expedient, order that the period allowed for registration shall be extended or, as the case may be, that the omission or mis-statement shall be rectified.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 321

Consequence of failure to register charges created by a company
‘(1) If a company creates a charge to which section (Charges created by a company) applies, the charge is void (so far as any security on the company’s property or undertaking is conferred by it) against—
(a) a liquidator of the company,
(b) an administrator of the company, and
(c) a creditor of the company,
unless that section is complied with.
(2) Subsection (1) is subject to the provisions of this Chapter.
(3) Subsection (1) is without prejudice to any contract or obligation for repayment of the money secured by the charge; and when a charge becomes void under this section, the money secured by it immediately becomes payable.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 322

Companies to keep copies of instruments creating charges
‘(1) Every company shall cause a copy of every instrument creating a charge, including every order or notice a copy of which has been delivered to the company under section (Northern Ireland: registration of certain charges etc. affecting land)(3)(b), requiring registration under this Chapter to be kept at its registered office.
(2) In the case of a series of uniform debentures, a copy of one of the debentures of the series is sufficient.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 323

Company’s register of charges
‘(1) Every limited company shall keep at its registered office a register of charges and enter in it—
(a) all charges specifically affecting property of the company, and
(b) all floating charges on the whole or part of the company’s property or undertaking.
(2) The entry shall in each case give a short description of the property charged, the amount of the charge and, except in the cases of securities to bearer, the names of the persons entitled to it.
(3) If an officer of the company knowingly and wilfully authorises or permits the omission of an entry required to be made in pursuance of this section, he commits an offence.
(4) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 324

Right to inspect instruments which create charges, etc.
‘(1) The copies of instruments creating any charge requiring registration under this Chapter with the registrar, and the register of charges kept in pursuance of section (Company’s register of charges), shall be open during business hours (but subject to such reasonable restrictions as the company in general meeting may impose, so that not less than 2 hours in each day be allowed for inspection) to the inspection of any creditor or member of the company without fee.
(2) The register of charges shall also be open to the inspection of any other person on payment of such fee for each inspection as the company may prescribe.
(3) If inspection of copies, or of the register, is refused an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(4) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine net exceeding one-tenth of level 3 on the standard scale.
(5) If such a refusal occurs, the court may by order compel an immediate inspection of the copies or register.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 325

Charges created by a company (No.2)
‘(1) A company that creates a charge to which this section applies must deliver the prescribed particulars of the charge, together with a copy certified as a correct copy of the instrument (if any) by which the charge is created or evidenced, to the registrar for registration before the end of the period allowed for registration.
(2) Registration of a charge to which this section applies may instead be effected on the application of a person interested in it.
(3) Where registration is effected on the application of some person other than the company, that person is entitled to recover from the company the amount of any fees properly paid by him to the registrar on the registration.
(4) If a company fails to comply with subsection (1), an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(5) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine, and
(b) on summary conviction, to a fine not exceeding the statutory maximum.
(6) Subsection (4) does not apply if registration of the charge has been effected on the application of some other person.
(7) This section applies to the following charges—
(a) a charge on land or any interest in such land, other than a charge for any rent or other periodical sum payable in respect of the land,
(b) a security over incorporeal moveable property of any of the following categories—
(i) goodwill,
(ii) a patent or a licence under a patent,
(iii) a trademark,
(iv) a copyright or a licence under a copyright,
(v) a registered design or a licence in respect of such a design,
(vi) a design right or a licence under a design right,
(vii) the book debts (whether book debts of the company or assigned to it), and
(viii) uncalled share capital of the company or calls made but not paid,
(c) a security over a ship or aircraft or any share in a ship,
(d) a floating charge.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 326

Charges which have to be registered: supplementary (No. 2)
‘(1) A charge on land, for the purposes of section (Charges created by a company (No. 2))(7)(a), includes a charge created by a heritable security within the meaning of section 9(8) of the Conveyancing and Feudal Reform (Scotland) Act 1970.
(2) The holding of debentures entitling the holder to a charge on land is not, for the purposes of section (Charges created by a company (No. 2))(7)(a), deemed to be an interest in land.
(3) It is immaterial for the purposes of this Chapter where land subject to a charge is situated.
(4) The deposit by way of security of a negotiable instrument given to secure the payment of book debts is not, for purposes of section (Charges created by a company (No. 2))(7)(c)(vii), to be treated as a charge on those book debts.
(5) References in this Chapter to the date of the creation of a charge are—
(a) in the case of a floating charge, the date on which the instrument creating the floating charge was executed by the company creating the charge, and
(b) in any other case, the date on which the right of the person entitled to the benefit of the charge was constituted as a real right.
(6) In this Chapter “company” means an incorporated company registered in Scotland.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 327

Charges existing on property acquired (No. 2)
‘(1) Subsection (2) applies where a company acquires any property which is subject to a charge of any kind as would, if it had been created by the company after the acquisition of the property, have been required to be registered under this Chapter.
(2) The company must deliver the prescribed particulars of the charge, together with a copy (certified to be a correct copy) of the instrument (if any) by which the charge was created or is evidenced, to the registrar for registration before the end of the period allowed for registration.
(3) If default is made in complying with this section, an offence is committed by—
(a) the company, and
(b) every officer of it who is in default.
(4) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 328

Charges by way of ex facie absolute disposition etc.
‘(1) For the avoidance of doubt, it is hereby declared that, in the case of a charge created by way of an ex facie absolute disposition or assignation qualified by a back letter or other agreement, or by a standard security qualified by an agreement, compliance with section (Charges created by a company (No. 2))(1) does not of itself render the charge unavailable as security for indebtedness incurred after the date of compliance.
(2) Where the amount secured by a charge so created is purported to be increased by a further back letter or agreement, a further charge is held to have been created by the ex facie absolute disposition or assignation or (as the case may be) by the standard security, as qualified by the further back letter or agreement.
(3) In that case, the provisions of this Chapter apply to the further charge as if—
(a) references in this Chapter (other than in this section) to the charge were references to the further charge, and
(b) references to the date of the creation of the charge were references to the date on which the further back letter or agreement was executed.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 329

Charge in series of debentures (No. 2)
‘(1) Where a series of debentures containing, or giving by reference to any other instrument, any charge to the benefit of which the debenture-holders of that series are entitled pari passu, is created by a company, it is sufficient for purposes of section (Charges created by a company (No. 2)) if the required particulars, together with a copy of the deed containing the charge (or, if there is no such deed, of one of the debentures of the series) are delivered to the registrar before the end of the period allowed for registration.
(2) The following are the required particulars—
(a) the total amount secured by the whole series,
(b) the dates of the resolutions authorising the issue of the series and the date of the covering deed (if any) by which the security is created or defined,
(c) a general description of the property charged,
(d) the names of the trustees (if any) for the debenture-holders, and
(e) in the case of a floating charge, a statement of any provisions of the charge and of any instrument relating to it which prohibit or restrict or regulate the power of the company to grant further securities ranking in priority to, or pari passu with, the floating charge, or which vary or otherwise regulate the order of ranking of the floating charge in relation to subsisting securities.
(3) Where more than one issue is made of debentures in the series, particulars of the date and amount of each issue of debentures of the series must be sent to the registrar for entry in the register of charges.
(4) Failure to comply with subsection (3) does not affect the validity of any of those debentures.
(5) Subsections (2) to (6) of section (Charges created by a company (No. 2)) apply for the purposes of this section as they apply for the purposes of that section but as if for the reference to the registration of the charge there was substituted a reference to the registration of the series of debentures.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 330

Additional registration requirement for commission etc. in relation to debentures (No.2)
‘(1) Where any commission, allowance or discount has been paid or made either directly or indirectly by a company to a person in consideration of his—
(a) subscribing or agreeing to subscribe, whether absolutely or conditionally, for debentures in a company, or
(b) procuring or agreeing to procure subscriptions, whether absolute or conditional, for such debentures,
the particulars required to be sent for registration under section (Charges created by a company (No. 2)) shall include particulars as to the amount or rate per cent. of the commission, discount or allowance so paid or made.
(2) The deposit of debentures as security for a debt of the company is not, for the purposes of this section, treated as the issue of debentures at a discount.
(3) Failure to comply with this section does not affect the validity of the debentures issued.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 331

Charges on property outside the United Kingdom
‘Where a charge is created in the United Kingdom but comprises property outside the United Kingdom, the copy of the instrument creating or purporting to create the charge may be sent for registration under section (Charges created by a company (No. 2)) even if further proceedings may be necessary to make the charge valid or effectual according to the law of the country in which the property is situated.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 332

Register of charges to be kept by registrar (No. 2)
‘(1) The registrar shall keep, with respect to each company, a register of all the charges requiring registration under this Chapter.
(2) In the case of a charge to the benefit of which holders of a series of debentures are entitled, the registrar shall enter in the register the required particulars specified in section (Charges in series of debentures (No. 2))(2).
(3) In the case of any other charge, the registrar shall enter in the register the following particulars—
(a) if it is a charge created by a company, the date of its creation and, if it is a charge which was existing on property acquired by the company, the date of the acquisition,
(b) the amount secured by the charge,
(c) short particulars of the property charged,
(d) the persons entitled to the charge, and
(e) in the case of a floating charge, a statement of any of the provisions of the charge and of any instrument relating to it which prohibit or restrict or regulate the company’s power to grant further securities ranking in priority to, or pari passu with, the floating charge, or which vary or otherwise regulate the order of ranking of the floating charge in relation to subsisting securities.
(4) The registrar shall give a certificate of the registration of any charge registered in pursuance of this Chapter, stating—
(a) the name of the company and the person first-named in the charge among those entitled to the benefit of the charge (or, in the case of a series of debentures, the name of the holder of the first such debenture issued), and
(b) the amount secured by the charge.
(5) The certificate—
(a) shall be signed by the registrar or authenticated by the registrar’s official seal, and
(b) is conclusive evidence that the requirements of this Chapter as to registration have been satisfied.
(6) The register kept in pursuance of this section shall be open to inspection by any person.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 333

The period allowed for registration (No. 2)
‘(1) The period allowed for registration of a charge created by a company is—
(a) 21 days beginning with the day after the day on which the charge is created, or
(b) if the charge is created outside the United Kingdom, the period allowed for registration, 21 days beginning with the day after the day on which a copy of the instrument by which the charge is created or evidenced could, in due course of post (and if despatched with due diligence) have been received in the United Kingdom.
(2) The period allowed for registration of a charge to which property acquired by a company is subject is—
(a) 21 days beginning with the day after the day on which the transaction is settled, or
(b) if the property is situated and the charge was created outside the United Kingdom, 21 days beginning with the day after the day on which a copy of the instrument by which the charge is created or evidenced could, in due course of post (and if despatched with due diligence) have been received in the United Kingdom.
(3) The period allowed for registration of particulars of a series of debentures as a result of section (Charge in series of debentures (No.2)) is—
(a) if there is a deed containing the charge mentioned in section (Charge in series of debentures (No. 2))(1), 21 days beginning with the day after the day on which that deed is executed, or
(b) if there is no such deed, 21 days beginning with the day after the day on which the first debenture of the series is executed.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 334

Entries of satisfaction and relief
‘(1) Subsection (2) applies if a statement is delivered to the registrar verifying with respect to any registered charge—
(a) that the debt for which the charge was given has been paid or satisfied in whole or in part, or
(b) that part of the property charged has been released from the charge or has ceased to form part of the company’s property.
(2) The registrar may enter on the register a memorandum of satisfaction (in whole or in part) regarding that fact.
(3) Where the registrar enters a memorandum of satisfaction in whole, he shall, if required, furnish the company with a copy of the memorandum.
(4) Without prejudice to the registrar’s duty under this section to require to be satisfied as above mentioned, he shall not be so satisfied unless—
(a) the creditor entitled to the benefit of the floating charge, or a person authorised to do so on his behalf, certifies as correct the particulars submitted to the registrar with respect to the entry on the register of a memorandum under this section, or
(b) the court, on being satisfied that such certification cannot readily be obtained, directs him accordingly.
(5) Nothing in this section requires the company to submit particulars with respect to the entry in the register of a memorandum of satisfaction where the company, having created a floating charge over all or any part of its property, disposes of part of the property subject to the floating charge.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 335

Rectification of register of charges (No. 2)
‘(1) Subsection (2) applies if the court is satisfied—
(a) that the failure to register a charge before the end of the period allowed for registration, or the omission or mis-statement of any particular with respect to any such charge or in a memorandum of satisfaction—
(i) was accidental or due to inadvertence or to some other sufficient cause, or
(ii) is not of a nature to prejudice the position of creditors or shareholders of the company, or
(b) that on other grounds it is just and equitable to grant relief.
(2) The court may, on the application of the company or a person interested, and on such terms and conditions as seem to the court just and expedient, order that the period allowed for registration shall be extended or, as the case may be, that the omission or mis-statement shall be rectified.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 336

Consequence of failure to register charges created by a company (No. 2)
‘(1) If a company creates a charge to which section (Charges created by a company (No. 2)) applies, the charge is void (so far as any security on the company’s property or any part of it is conferred by the charge) against—
(a) the liquidator of the company,
(b) an administrator of the company, and
(c) any creditor of the company
unless that section is complied with.
(2) Subsection (1) is without prejudice to any contract or obligation for repayment of the money secured by the charge; and when a charge becomes void under this section the money secured by it immediately becomes payable.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 337

Companies to keep copies of instruments creating charges (No. 2)
‘(1) Every company shall cause a copy of every instrument creating a charge requiring registration under this Chapter to be kept at the company’s registered office.
(2) In the case of a series of uniform debentures, a copy of one debenture of the series is sufficient.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 338

Company’s register of charges (No. 2)
‘(1) Every company shall keep at its registered office a register of charges and enter in it all charges specifically affecting property of the company, and all floating charges on any property of the company.
(2) There shall be given in each case a short description of the property charged, the amount of the charge and, except in the case of securities to bearer, the names of the persons entitled to it.
(3) If an officer of the company knowingly and wilfully authorises or permits the omission of an entry required to be made in pursuance of this section, he commits an offence.
(4) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 339

Right to inspect copies of instruments and company’s register
‘(1) The copies of instruments creating charges requiring registration under this Chapter with the registrar, and the register of charges kept in pursuance of section (Company’s register of charges (No. 2)), shall be open during business hours (but subject to such reasonable restrictions as the company in general meeting may impose, so that not less than 2 hours in each day be allowed for inspection) to the inspection of any creditor or member of the company without fee.
(2) The register of charges shall be open to the inspection of any other person on payment of such fee as the company may prescribe.
(3) If inspection of copies, or of the register, is refused an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(4) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine net exceeding one-tenth of level 3 on the standard scale.
(5) If such a refusal occurs in relation to a company, the court may by order compel an immediate inspection of the copies or register.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 340

Power to make provision for effect of registration in special register
‘(1) In this section a “special register” means a register, other than the register of charges kept under this Part, in which a charge to which Chapter 1 or Chapter 2 applies is required or authorised to be registered.
(2) The Secretary of State may by order make provision for facilitating the making of information-sharing arrangements between the person responsible for maintaining a special register (“the responsible person”) and the registrar that meet the requirement in subsection (4).
“Information-sharing arrangements” are arrangements to share and make use of information held by the registrar or by the responsible person.
(3) If the Secretary of State is satisfied that appropriate information-sharing arrangements have been made, he may by order provide that—
(a) the registrar is authorised not to register a charge of a specified description under Chapter 1 or Chapter 2 of this Part,
(b) a charge of a specified description that is registered in the special register within a specified period is to be treated as if it had been registered (and certified by the registrar as registered) in accordance with the requirements of Chapter 1 or, as the case may be, Chapter 2, and
(c) the other provisions of Chapter 1 or, as the case may be, Chapter 2 of this Part apply to a charge so treated with specified modifications.
(4) The information-sharing arrangements must ensure that persons inspecting the register of charges—
(a) are made aware, in a manner appropriate to the inspection, of the existence of charges in the special register which are treated in accordance with provision so made, and
(b) are able to obtain information from the special register about any such charge.
(5) An order under this section may—
(a) modify any enactment or rule of law which would otherwise restrict or prevent the responsible person from entering into or giving effect to information-sharing arrangements,
(b) authorise the responsible person to require information to be provided to him for the purposes of the arrangements,
(c) make provision about—
(i) the charging by the responsible person of fees in connection with the arrangements and the destination of such fees (including provision modifying any enactment which would otherwise apply in relation to fees payable to the responsible person), and
(ii) the making of payments under the arrangements by the registrar to the responsible person,
(d) require the registrar to make copies of the arrangements available to the public (in hard copy or electronic form).
(6) In this section “specified” means specified in an order under this section.
(7) A description of charge may be specified, in particular, by reference to one or more of the following—
(a) the type of company by which it is created,
(b) the form of charge which it is,
(c) the description of assets over which it is granted,
(d) the length of the period between the date of its registration in the special register and the date of its creation.
(8) Provision may be made under this section relating to registers maintained under the law of a country or territory outside the United Kingdom.
(9) An order under this section is subject to negative resolution procedure.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 341

General power to make amendments to this Part
‘(1) The Secretary of State may by regulations under this section—
(a) amend this Part by altering, adding or repealing provisions,
(b) make consequential amendments or repeals in this Act or any other enactment (whether passed or made before or after this Act).
(2) Regulations under this section are subject to affirmative resolution procedure.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 342

Scheme of this Part
‘(1) The provisions of this Part apply where a compromise or arrangement is proposed—
(a) between a company and its creditors, or any class of them, or
(b) between the company and its members, or any class of them.
(2) The provisions of sections (Court sanction for compromise or arrangement) to (Copy of court order to be annexed to copies of company’s constitution) (court sanction for compromise or arrangement) apply in every case.
(3) The provisions of section (Powers of court to facilitate reconstruction or amalgamation) (powers of court to facilitate reconstruction or amalgamation) supplement those provisions.
(4) The provisions mentioned above have effect subject to regulations under section (Power to make provision for mergers and divisions of public companies) (mergers and divisions of public companies) in the circumstances specified in that section.
(5) In this Part—
“arrangement” includes a reorganisation of the company’s share capital by the consolidation of shares of different classes or by the division of shares into shares of different classes, or by both of those methods; and
“company”—
(i) in sections (Powers of court to facilitate reconstruction or amalgamation), (Copy of order to be delivered to registrar) and (Power to make provision for mergers and divisions of public companies) means a company within the meaning of this Act, and
(j) elsewhere in this Part means any company liable to be wound up under the Insolvency Act 1986 (c. 45) or the Insolvency (Northern Ireland) Order 1989 (S.I.1989/2405(N.I.19)).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 343

Court sanction for compromise or arrangement
‘Where a compromise or arrangement is proposed between a company and its creditors, or any class of them, or between the company and its members, or any class of them—
(a) the company,
(b) any creditor or member of the company, or
(c) if the company is being wound up or an administration order is in force in relation it, the liquidator or administrator,
may apply to the court to sanction the compromise or arrangement.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 344

Meeting of creditors or members
On receiving an application under section (Court sanction for compromise or arrangement) (application to sanction compromise or arrangement with creditors or members) the court may order a meeting of the creditors or class of creditors, or of the members of the company or class of members (as the case may be), to be summoned in such manner as the court directs.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 345

Statement to be circulated or made available
‘(1) Where a meeting is summoned under section (Meeting of creditors or members)—
(a) every notice summoning the meeting that is sent to a creditor or member must be accompanied by a statement complying with this section, and
(b) every notice summoning the meeting that is given by advertisement must either—
(i) include such a statement, or
(ii) state where and how creditors or members entitled to attend the meeting may obtain copies of such a statement
(2) The statement must—
(a) explain the effect of the compromise or arrangement, and
(b) in particular, state—
(i) any material interests of the directors of the company (whether as directors or as members or as creditors of the company or otherwise), and
(ii) the effect on those interests of the compromise or arrangement, in so far as it is different from the effect on the like interests of other persons.
(3) Where the compromise or arrangement affects the rights of debenture holders of the company, the statement must give the like explanation as respects the trustees of any deed for securing the issue of the debentures as it is required to give as respects the company’s directors.
(4) Where a notice given by advertisement states that copies of an explanatory statement can be obtained by creditors or members entitled to attend the meeting, every such creditor or member is entitled, on making application in the manner indicated by the notice, to be provided by the company with a copy of the statement free of charge.
(5) If a company makes default in complying with any requirement of this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
This is subject to subsection (7) below.
(6) For this purpose the following are treated as officers of the company—
(a) a liquidator or administrator of the company, and
(b) a trustee of a deed for securing the issue of debentures of the company.
(7) A person is not guilty of an offence under this section if he shows that the default was due to the refusal of a director or trustee for debenture holders to supply the necessary particulars of his interests.
(8) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 346

Duty of directors and trustees to provide information
‘(1) It is the duty of—
(a) any director of the company, and
(b) any trustee for its debenture holders,
to give notice to the company of such matters relating to himself as may be necessary for purposes of section (Statement to be circulated or made available) (explanatory statement to be circulated or made available).
(2) Any person who makes default in complying with this section commits an offence.
(3) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 347

Court order sanctioning compromise or arrangement
‘(1) The court may sanction a compromise or arrangement only if, at a meeting summoned under section (Meeting of creditors or members), a majority in number representing 75% in value of the creditors or class of creditors or members or class of members (as the case may be), present and voting either in person or by proxy at the meeting, agree to the compromise or arrangement.
(2) A compromise or agreement sanctioned by the court is binding on—
(a) all creditors or the class of creditors or on the members or class of members (as the case may be), and
(b) the company or, in the case of a company in the course of being wound up, the liquidator and contributories of the company.
(3) The court’s order has no effect until a copy of it has been delivered to the registrar of companies for registration.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 348

Copy of court order to be annexed to copies of company’s constitution
‘(1) A copy of every order of the court under section (Court order sanctioning compromise or arrangement) (order sanctioning compromise or arrangement with creditors or members) must be annexed to—
(a) every copy of the company’s articles issued after the order has been made or,
(b) in the case of a company not having articles of association, of every copy so issued of the instrument constituting the company or defining its constitution.
(2) If a company makes default in complying with this section an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(3) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 349

Powers of court to facilitate reconstruction or amalgamation
‘(1) This section applies where—
(a) application is made to the court under section (Court sanction for compromise or arrangement) to sanction a compromise or arrangement proposed between a company and any such persons as are mentioned in that section, and
(b) it is shown that—
(i) the compromise or arrangement is proposed for the purposes of, or in connection with, a scheme for the reconstruction of any company or companies, or the amalgamation of any two or more companies, and
(ii) under the scheme the whole or any part of the undertaking or the property of any company concerned in the scheme (“a transferor company”) is to be transferred to another company (“the transferee company”).
(2) The court may, either by the order sanctioning the compromise or arrangement or by any subsequent order, make provision for all or any of the following matters—
(a) the transfer to the transferee company of the whole or any part of the undertaking and of the property or liabilities of any transferor company;
(b) the allotting or appropriation by the transferee company of any shares, debentures, policies or other like interests in that company which under the compromise or arrangement are to be allotted or appropriated by that company to or for any person;
(c) the continuation by or against the transferee company of any legal proceedings pending by or against any transferor company;
(d) the dissolution, without winding up, of any transferor company;
(e) the provision to be made for any persons who, within such time and in such manner as the courts directs, dissent from the compromise or arrangement;
(f) such incidental, consequential and supplemental matters as are necessary to secure that the reconstruction or amalgamation is fully and effectively carried out.
(3) If an order under this section provides for the transfer of property or liabilities—
(a) the property is by virtue of the order transferred to, and vests in, the transferee company, and
(b) the liabilities are, by virtue of the order, transferred to and become liabilities of that company.
(4) The property (if the order so directs) vests freed from any charge that is by virtue of the compromise or arrangement to cease to have effect.
(5) In this section—
“property” includes property, rights and powers of every description; and
“liabilities” includes duties.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 350

Copy of order to be delivered to the registrar
‘(1) Where an order is made under section (Powers of court to facilitate reconstruction or amalgamation) (powers of court to facilitate reconstruction or amalgamation), every company in relation to which the order is made must cause a copy of the order to be delivered to the registrar of companies for registration within 7 days after its making.
(2) If default is made in complying with this section an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(3) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 351

Power to make provision for mergers and divisions of public companies
‘(1) Where—
(a) a compromise or arrangement is proposed between a public company and any such persons as are mentioned in section (Court sanction for compromise or arrangement) for the purpose of, or in connection with, a scheme for—
(i) the reconstruction of any company or companies, or
(ii) the amalgamation of any two or more companies,
(b) the circumstances are as specified in any of the Cases described below, and
(c) the consideration for the transfer or each of the transfers envisaged in the Case in question is to be shares in the transferee company or any of the transferee companies receivable by members of the transferor company or transferor companies, with or without any cash payment to members,
the preceding provisions of this Part have effect, as regards that compromise or arrangement, subject to regulations under this section.
(2) The Cases are—
Case 1
Where under the scheme the undertaking property and liabilities of the company in respect of which the compromise or arrangement in question is proposed are to be transferred to another public company, other than one formed for the purpose of, or in connection with, the scheme.
Case 2
Where under the scheme the undertaking, property and liabilities of two or more public companies concerned in the scheme, including the company in respect of which the compromise or arrangement in question is proposed, are to be transferred to a company (whether or not a public company) formed for the purposes of or in connection with the scheme.
Case 3
Where under the scheme the undertaking, property and liabilities of the company in respect of which the compromise or arrangement in question is proposed are to be divided among and transferred to two or more companies each of which is either—
(a) a public company, or
(b) a company (whether or not a public company) formed for the purposes of, or in connection with, the scheme.
(3) This section does not apply where the company in respect of which the compromise or arrangement is proposed is being wound up.
(4) The Secretary of State may by regulations provide that where this section applies the court must not sanction a compromise or arrangement unless the requirements of the regulations have been complied with.
(5) Without prejudice to the generality of the power conferred by this section, the regulations may make any such provision as was formerly made by section 427A(3) of, and Schedule 15B to, the Companies Act 1985 (c. 6).
(6) Regulations under this section are subject to affirmative resolution procedure.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 352

Meaning of “takeover offer”
‘(1) For the purposes of this Chapter an offer to acquire shares in a company is a “takeover offer” if the following two conditions are satisfied in relation to the offer.
(2) The first condition is that it is an offer to acquire—
(a) all the shares in a company, or
(b) where there is more than one class of shares in a company, all the shares of one or more classes,
other than shares that at the date of the offer are already held by the offeror.
Section (Shares already held by the offeror etc) contains provision supplementing this subsection.
(3) The second condition is that the terms of the offer are the same—
(a) in relation to all the shares to which the offer relates, or
(b) where the shares to which the offer relates include shares of different classes, in relation to all the shares of each class.
Section (Cases where offer treated as being on same terms) contains provision treating this condition as satisfied in certain circumstances.
(4) In subsections (1) to (3) “shares” means shares, other than relevant treasury shares, that have been allotted on the date of the offer (but see subsection (5)).
(5) A takeover offer may include among the shares to which it relates—
(a) all or any shares that are allotted after the date of the offer but before a specified date;
(b) all or any relevant treasury shares that cease to be held as treasury shares before a specified date;
(c) all or any other relevant treasury shares.
(6) In this section—
“relevant treasury shares” means shares that—
(k) are held by the company as treasury shares on the date of the offer, or
(l) become shares held by the company as treasury shares after that date but before a specified date;
“specified date” means a date specified in or determined in accordance with the terms of the offer.
(7) Where the terms of an offer make provision for their revision and for acceptances on the previous terms to be treated as acceptances on the revised terms, then, if the terms of the offer are revised in accordance with that provision—
(a) the revision is not to be regarded for the purposes of this Chapter as the making of a fresh offer, and
(b) references in this Chapter to the date of the offer are accordingly to be read as references to the date of the original offer.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 353

Shares already held by the offeror etc
‘(1) The reference in section (Meaning of “takeover offer”)(2) to shares already held by the offeror includes a reference to shares that he has contracted to acquire, whether unconditionally or subject to conditions being met.
This is subject to subsection (2).
(2) The reference in section (Meaning of “takeover offer”)(2) to shares already held by the offeror does not include a reference to shares that are the subject of a contract—
(a) intended to secure that the holder of the shares will accept the offer when it is made, and
(b) entered into—
(i) by deed and for no consideration,
(ii) for consideration of negligible value, or
(iii) for consideration consisting of a promise by the offeror to make the offer.
(3) In relation to Scotland, this section applies as if the words “by deed and” in subsection (2)(b)(i) were omitted.
(4) The condition in section (Meaning of “takeover offer”)(2) is treated as satisfied where—
(a) the offer does not extend to shares that associates of the offeror hold or have contracted to acquire (whether unconditionally or subject to conditions being met), and
(b) the condition would be satisfied if the offer did extend to those shares.
(For further provision about such shares, see section (Shares to which an offer relates)(2)).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 354

Cases where offer treated as being on same terms
‘(1) The condition in section (Meaning of “takeover offer”)(3) (terms of offer to be the same for all shares or all shares of particular classes) is treated as satisfied where subsection (2) or (3) below applies.
(2) This subsection applies where—
(a) shares carry an entitlement to a particular dividend which other shares of the same class, by reason of being allotted later, do not carry,
(b) there is a difference in the value of consideration offered for the shares allotted earlier as against that offered for those allotted later,
(c) that difference merely reflects the difference in entitlement to the dividend, and
(d) the condition in section (Meaning of “takeover offer”)(3) would be satisfied but for that difference.
(3) This subsection applies where—
(a) the law of a country or territory outside the United Kingdom—
(i) precludes an offer of consideration in the form, or any of the forms, specified in the terms of the offer (“the specified form”), or
(ii) precludes it except after compliance by the offeror with conditions with which he is unable to comply or which he regards as unduly onerous,
(b) the persons to whom an offer of consideration in the specified form is precluded are able to receive consideration in another form that is of substantially equivalent value, and
(c) the condition in section (Meaning of “takeover offer”)(3) would be satisfied but for the fact that an offer of consideration in the specified form to those persons is precluded.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 355

Shares to which an offer relates
‘(1) Where a takeover offer is made and, during the period beginning with the date of the offer and ending when the offer can no longer be accepted, the offeror—
(a) acquires or unconditionally contracts to acquire any of the shares to which the offer relates, but
(b) does not do so by virtue of acceptances of the offer,
those shares are treated for the purposes of this Chapter as excluded from those to which the offer relates.
(2) For the purposes of this Chapter shares that an associate of the offeror holds or has contracted to acquire, whether at the date of the offer or subsequently, are not treated as shares to which the offer relates, even if the offer extends to such shares.
In this subsection “contracted” means contracted unconditionally or subject to conditions being met.
(3) This section is subject to section (Right of offeror to buy out minority shareholder)(8) and (9).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 356

Effect of impossibility etc of communicating or accepting offer
‘(1) Where there are holders of shares in a company to whom an offer to acquire shares in the company is not communicated, that does not prevent the offer from being a takeover offer for the purposes of this Chapter if—
(a) those shareholders have no registered address in the United Kingdom,
(b) the offer was not communicated to those shareholders in order not to contravene the law of a country or territory outside the United Kingdom, and
(c) either—
(i) the offer is published in the Gazette, or
(ii) the offer can be inspected, or a copy of it obtained, at a place in an EEA State or on a website, and a notice is published in the Gazette specifying the address of that place or website.
(2) Where an offer is made to acquire shares in a company and there are persons for whom, by reason of the law of a country or territory outside the United Kingdom, it is impossible to accept the offer, or more difficult to do so, that does not prevent the offer from being a takeover offer for the purposes of this Chapter.
(3) It is not to be inferred—
(a) that an offer which is not communicated to every holder of shares in the company cannot be a takeover offer for the purposes of this Chapter unless the requirements of paragraphs (a) to (c) of subsection (1) are met, or
(b) that an offer which is impossible, or more difficult, for certain persons to accept cannot be a takeover offer for those purposes unless the reason for the impossibility or difficulty is the one mentioned in subsection (2).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 357

Right of offeror to buy out minority shareholder
‘(1) Subsection (2) applies in a case where a takeover offer does not relate to shares of different classes.
(2) If the offeror has, by virtue of acceptances of the offer, acquired or unconditionally contracted to acquire—
(a) not less than 90% in value of the shares to which the offer relates, and
(b) in a case where the shares to which the offer relates are voting shares, not less than 90% of the voting rights carried by those shares,
he may give notice to the holder of any shares to which the offer relates which the offeror has not acquired or unconditionally contracted to acquire that he desires to acquire those shares.
(3) Subsection (4) applies in a case where a takeover offer relates to shares of different classes.
(4) If the offeror has, by virtue of acceptances of the offer, acquired or unconditionally contracted to acquire—
(a) not less than 90% in value of the shares of any class to which the offer relates, and
(b) in a case where the shares of that class are voting shares, not less than 90% of the voting rights carried by those shares,
he may give notice to the holder of any shares of that class to which the offer relates which the offeror has not acquired or unconditionally contracted to acquire that he desires to acquire those shares.
(5) In the case of a takeover offer which includes among the shares to which it relates—
(a) shares that are allotted after the date of the offer, or
(b) relevant treasury shares (within the meaning of section (Meaning of “takeover offer”)) that cease to be held as treasury shares after the date of the offer,
the offeror’s entitlement to give a notice under subsection (2) or (4) on any particular date shall be determined as if the shares to which the offer relates did not include any allotted, or ceasing to be held as treasury shares, on or after that date.
(6) Subsection (7) applies where—
(a) the requirements for the giving of a notice under subsection (2) or (4) are satisfied, and
(b) there are shares in the company which the offeror, or an associate of his, has contracted to acquire subject to conditions being met, and in relation to which the contract has not become unconditional.
(7) The offeror’s entitlement to give a notice under subsection (2) or (4) shall be determined as if—
(a) the shares to which the offer relates included shares falling within paragraph (b) of subsection (6), and
(b) in relation to shares falling within that paragraph, the words “by virtue of acceptances of the offer” in subsection (2) or (4) were omitted.
(8) Where a takeover offer is made and, during the period beginning with the date of the offer and ending when the offer can no longer be accepted, the offeror—
(a) acquires or unconditionally contracts to acquire any of the shares to which the offer relates, but
(b) does not do so by virtue of acceptances of the offer,
then, if subsection (10) applies, the offeror is treated for the purposes of this section as having acquired or contracted to acquire those shares by virtue of acceptances of the offer.
(9) Where a takeover offer is made and, during the period beginning with the date of the offer and ending when the offer can no longer be accepted, an associate of the offeror acquires or unconditionally contracts to acquire any of the shares to which the offer relates, then, if subsection (10) applies, those shares are treated for the purposes of this section as shares to which the offer relates.
(10) This subsection applies if—
(a) at the time the shares are acquired or contracted to be acquired as mentioned in subsection (8) or (9) (as the case may be), the value of the consideration for which they are acquired or contracted to be acquired (“the acquisition consideration”) does not exceed the value of the consideration specified in the terms of the offer, or
(b) those terms are subsequently revised so that when the revision is announced the value of the acquisition consideration, at the time mentioned in paragraph (a), no longer exceeds the value of the consideration specified in those terms.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 358

Further provision about notices given under section (Right of offeror to buy out minority shareholder)
‘(1) A notice under section (Right of offeror to buy out minority shareholder) must be given in the prescribed manner.
(2) No notice may be given under section (Right of offeror to buy out minority shareholder)(2) or (4) after the end of—
(a) the period of three months beginning with the day after the last day on which the offer can be accepted, or
(b) the period of six months beginning with the date of the offer, where that period ends earlier and the offer is one to which subsection (3) below applies.
(3) This subsection applies to an offer if the time allowed for acceptance of the offer is not governed by rules under section 643(1) that give effect to Article 7 of the Takeovers Directive.
In this subsection “the Takeovers Directive” has the same meaning as in section 643.
(4) At the time when the offeror first gives a notice under section (Right of offeror to buy out minority shareholder) in relation to an offer, he must send to the company—
(a) a copy of the notice, and
(b) a statutory declaration by him in the prescribed form, stating that the conditions for the giving of the notice are satisfied.
(5) Where the offeror is a company (whether or not a company within the meaning of this Act) the statutory declaration must be signed by a director.
(6) A person commits an offence if—
(a) he fails to send a copy of a notice or a statutory declaration as required by subsection (4), or
(b) he makes such a declaration for the purposes of that subsection knowing it to be false or without having reasonable grounds for believing it to be true.
(7) It is a defence for a person charged with an offence for failing to send a copy of a notice as required by subsection (4) to prove that he took reasonable steps for securing compliance with that subsection.
(8) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both);
(b) on summary conviction—
(i) in England and Wales, to imprisonment for a term not exceeding twelve months or to a fine not exceeding the statutory maximum (or both) and, for continued contravention, a daily default fine not exceeding one-fiftieth of the statutory maximum;
(ii) in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months, or to a fine not exceeding the statutory maximum (or both) and, for continued contravention, a daily default fine not exceeding one-fiftieth of the statutory maximum.’.—[Margaret Hodge.]

Brought up, read the First time and Second time, and added to the Bill.

New Clause 359

Effect of notice under section (Right of offeror to buy out minority shareholder)
‘(1) Subject to section (Applications to the court), this section applies where the offeror gives a shareholder a notice under section (Right of offeror to buy out minority shareholder).
(2) The offeror is entitled and bound to acquire the shares to which the notice relates on the terms of the offer.
(3) Where the terms of an offer are such as to give the shareholder a choice of consideration, the notice must give particulars of the choice and state—
(a) that the shareholder may, within six weeks from the date of the notice, indicate his choice by a written communication sent to the offeror at an address specified in the notice, and
(b) which consideration specified in the offer will apply if he does not indicate a choice.
The reference in subsection (2) to the terms of the offer is to be read accordingly.
(4) Subsection (3) applies whether or not any time-limit or other conditions applicable to the choice under the terms of the offer can still be complied with.
(5) If the consideration offered to or (as the case may be) chosen by the shareholder—
(a) is not cash and the offeror is no longer able to provide it, or
(b) was to have been provided by a third party who is no longer bound or able to provide it,
the consideration is to be taken to consist of an amount of cash, payable by the offeror, which at the date of the notice is equivalent to the consideration offered or (as the case may be) chosen.
(6) At the end of six weeks from the date of the notice the offeror must immediately—
(a) send a copy of the notice to the company, and
(b) pay or transfer to the company the consideration for the shares to which the notice relates.
Where the consideration consists of shares or securities to be allotted by the offeror, the reference in paragraph (b) to the transfer of the consideration is to be read as a reference to the allotment of the shares or securities to the company.
(7) If the shares to which the notice relates are registered, the copy of the notice sent to the company under subsection (6)(a) must be accompanied by an instrument of transfer executed on behalf of the holder of the shares by a person appointed by the offeror.
On receipt of that instrument the company must register the offeror as the holder of those shares.
(8) If the shares to which the notice relates are transferable by the delivery of warrants or other instruments, the copy of the notice sent to the company under subsection (6)(a) must be accompanied by a statement to that effect.
On receipt of that statement the company must issue the offeror with warrants or other instruments in respect of the shares, and those already in issue in receipt of the shares become void.
(9) The company must hold any money or other consideration received by it under subsection (6)(b) on trust for the person who, before the offeror acquired them, was entitled to the shares in respect of which the money or other consideration was received.
Section (Further provision about consideration held on trust under section (Effect of notice under section (Right of offeror to buy out minority shareholder))(9)) contains further provision about how the company should deal with such money or other consideration.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 360

Further provision about consideration held on trust under section (Effect of notice under section (Right of offeror to buy out minority shareholder))(9)
‘(1) This section applies where an offeror pays or transfers consideration to the company under section (Effect of notice under section (Right of offeror to buy out minority shareholder))(6).
(2) The company must pay into a separate bank account that complies with subsection (3)—
(a) any money it receives under paragraph (b) of section (Effect of notice under section (Right of offeror to buy out minority shareholder))(6), and
(b) any dividend or other sum accruing from any other consideration it receives under that paragraph.
(3) A bank account complies with this subsection if the balance on the account—
(a) bears interest at an appropriate rate, and
(b) can be withdrawn by such notice (if any) as is appropriate.
(4) If—
(a) the person entitled to the consideration held on trust by virtue of section (Effect of notice under section (Right of offeror to buy out minority shareholder))(9) cannot be found, and
(b) subsection (5) applies,
the consideration (together with any interest, dividend or other benefit that has accrued from it) must be paid into court.
(5) This subsection applies where—
(a) reasonable enquiries have been made at reasonable intervals to find the person, and
(b) twelve years have elapsed since the consideration was received, or the company is wound up.
(6) In relation to a company registered in Scotland, subsections (7) and (8) apply instead of subsection (4).
(7) If the person entitled to the consideration held on trust by virtue of section (Effect of notice under section (Right of offeror to buy out minority shareholder))(9) cannot be found and subsection (5) applies—
(a) the trust terminates,
(b) the company or (if the company is wound up) the liquidator must sell any consideration other than cash and any benefit other than cash that has accrued from the consideration, and
(c) a sum representing—
(i) the consideration so far as it is cash,
(ii) the proceeds of any sale under paragraph (b), and
(iii) any interest, dividend or other benefit that has accrued from the consideration,
must be deposited in the name of the Accountant of Court in a separate bank account complying with subsection (3) and the receipt for the deposit must be transmitted to the Accountant of Court.
(8) Section 58 of the Bankruptcy (Scotland) Act 1985 (c. 66) (so far as consistent with this Act) applies (with any necessary modifications) to sums deposited under subsection (7) as it applies to sums deposited under section 57(1)(a) of that Act.
(9) The expenses of any such enquiries as are mentioned in subsection (5) may be paid out of the money or other property held on trust for the person to whom the enquiry relates.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 361

Right of minority shareholder to be bought out by offeror
‘(1) Subsections (2) and (3) apply in a case where a takeover offer relates to all the shares in a company.
For this purpose a takeover offer relates to all the shares in a company if it is an offer to acquire all the shares in the company within the meaning of section (Meaning of “takeover offer”).
(2) The holder of any voting shares to which the offer relates who has not accepted the offer may require the offeror to acquire those shares if, at any time before the end of the period within which the offer can be accepted—
(a) the offeror has by virtue of acceptances of the offer acquired or unconditionally contracted to acquire some (but not all) of the shares to which the offer relates, and
(b) those shares, with or without any other shares in the company which he has acquired or contracted to acquire (whether unconditionally or subject to conditions being met)—
(i) amount to not less than 90% in value of all the voting shares in the company (or would do so but for section (Debentures carrying voting rights)(1)), and
(ii) carry not less than 90% of the voting rights in the company (or would do so but for section (Debentures carrying voting rights)(1)).
(3) The holder of any non-voting shares to which the offer relates who has not accepted the offer may require the offeror to acquire those shares if, at any time before the end of the period within which the offer can be accepted—
(a) the offeror has by virtue of acceptances of the offer acquired or unconditionally contracted to acquire some (but not all) of the shares to which the offer relates, and
(b) those shares, with or without any other shares in the company which he has acquired or contracted to acquire (whether unconditionally or subject to conditions being met), amount to not less than 90% in value of all the shares in the company (or would do so but for section (Debentures carrying voting rights)(1)).
(4) If a takeover offer relates to shares of one or more classes and at any time before the end of the period within which the offer can be accepted—
(a) the offeror has by virtue of acceptances of the offer acquired or unconditionally contracted to acquire some (but not all) of the shares of any class to which the offer relates, and
(b) those shares, with or without any other shares of that class which he has acquired or contracted to acquire (whether unconditionally or subject to conditions being met)—
(i) amount to not less than 90% in value of all the shares of that class, and
(ii) in a case where the shares of that class are voting shares, carry not less than 90% of the voting rights carried by the shares of that class,
the holder of any shares of that class to which the offer relates who has not accepted the offer may require the offeror to acquire those shares.
(5) For the purposes of subsections (2) to (4), in calculating 90% of the value of any shares, shares held by the company as treasury shares are to be treated as having been acquired by the offeror.
(6) Subsection (7) applies where—
(a) a shareholder exercises rights conferred on him by subsection (2), (3) or (4),
(b) at the time when he does so, there are shares in the company which the offeror has contracted to acquire subject to conditions being met, and in relation to which the contract has not become unconditional, and
(c) the requirement imposed by subsection (2)(b), (3)(b) or (4)(b) (as the case may be) would not be satisfied if those shares were not taken into account.
(7) The shareholder is treated for the purposes of section (Effect of requirement under section (Right of minority shareholder to be bought out by offeror)) as not having exercised his rights under this section unless the requirement imposed by paragraph (b) of subsection (2), (3) or (4) (as the case may be) would be satisfied if—
(a) the reference in that paragraph to other shares in the company which the offeror has contracted to acquire unconditionally or subject to conditions being met were a reference to such shares which he has unconditionally contracted to acquire, and
(b) the reference in that subsection to the period within which the offer can be accepted were a reference to the period referred to in section (Further provision about rights conferred by section (Right of minority shareholder to be bought out by offeror))(2).
(8) A reference in subsection (2)(b), (3)(b), (4)(b), (6) or (7) to shares which the offeror has acquired or contracted to acquire includes a reference to shares which an associate of his has acquired or contracted to acquire.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 362

Further provision about rights conferred by section (Right of minority shareholder to be bought out by offeror)
‘(1) Rights conferred on a shareholder by subsection (2), (3) or (4) of section (Right of minority shareholder to be bought out by offeror) are exercisable by a written communication addressed to the offeror.
(2) Rights conferred on a shareholder by subsection (2), (3) or (4) of that section are not exercisable after the end of the period of three months from—
(a) the end of the period within which the offer can be accepted, or
(b) if later, the date of the notice that must be given under subsection (3) below.
(3) Within one month of the time specified in subsection (2), (3) or (4) (as the case may be) of that section, the offeror must give any shareholder who has not accepted the offer notice in the prescribed manner of—
(a) the rights that are exercisable by the shareholder under that subsection, and
(b) the period within which the rights are exercisable.
If the notice is given before the end of the period within which the offer can be accepted, it must state that the offer is still open for acceptance.
(4) Subsection (3) does not apply if the offeror has given the shareholder a notice in respect of the shares in question under section (Right of offeror to buy out minority shareholder).
(5) An offeror who fails to comply with subsection (3) commits an offence.
If the offeror is a company, every officer of the company who is in default or to whose neglect the failure is attributable also commits an offence.
(6) If an offeror other than a company is charged with an offence for failing to comply with subsection (3), it is a defence for him to prove that he took all reasonable steps for securing compliance with that subsection.
(7) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum and, for continued contravention, a daily default fine not exceeding one-fiftieth of the statutory maximum.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 363

Effect of requirement under section (Right of minority shareholder to be bought out by offeror)
‘(1) Subject to section (Applications to the court), this section applies where a shareholder exercises his rights under section (Right of minority shareholder to be bought out by offeror) in respect of any shares held by him.
(2) The offeror is entitled and bound to acquire those shares on the terms of the offer or on such other terms as may be agreed.
(3) Where the terms of an offer are such as to give the shareholder a choice of consideration—
(a) the shareholder may indicate his choice when requiring the offeror to acquire the shares, and
(b) the notice given to the shareholder under section (Further provision about rights conferred by section (Right of minority shareholder to be bought out by offeror))(3)—
(i) must give particulars of the choice and of the rights conferred by this subsection, and
(ii) may state which consideration specified in the offer will apply if he does not indicate a choice.
The reference in subsection (2) to the terms of the offer is to be read accordingly.
(4) Subsection (3) applies whether or not any time-limit or other conditions applicable to the choice under the terms of the offer can still be complied with.
(5) If the consideration offered to or (as the case may be) chosen by the shareholder—
(a) is not cash and the offeror is no longer able to provide it, or
(b) was to have been provided by a third party who is no longer bound or able to provide it,
the consideration is to be taken to consist of an amount of cash, payable by the offeror, which at the date when the shareholder requires the offeror to acquire the shares is equivalent to the consideration offered or (as the case may be) chosen.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 364

Applications to the court
‘(1) Where a notice is given under section (Right of offeror to buy out minority shareholder) to a shareholder the court may, on an application made by him, order—
(a) that the offeror is not entitled and bound to acquire the shares to which the notice relates, or
(b) that the terms on which the offeror is entitled and bound to acquire the shares shall be such as the court thinks fit.
(2) An application under subsection (1) must be made within six weeks from the date on which the notice referred to in that subsection was given.
If an application to the court under subsection (1) is pending at the end of that period, section (Effect of notice under section (Right of offeror to buy out minority shareholder))(6) does not have effect until the application has been disposed of.
(3) Where a shareholder exercises his rights under section (Right of minority shareholder to be bought out by offeror) in respect of any shares held by him, the court may, on an application made by him or the offeror, order that the terms on which the offeror is entitled and bound to acquire the shares shall be such as the court thinks fit.
(4) On an application under subsection (1) or (3)—
(a) the court may not require consideration of a higher value than that specified in the terms of the offer (“the offer value”) to be given for the shares to which the application relates unless the holder of the shares shows that the offer value would be unfair;
(b) the court may not require consideration of a lower value than the offer value to be given for the shares.
(5) No order for costs or expenses may be made against a shareholder making an application under subsection (1) or (3) unless the court considers that—
(a) the application was unnecessary, improper or vexatious,
(b) there has been unreasonable delay in making the application, or
(c) there has been unreasonable conduct on the shareholder’s part in conducting the proceedings on the application.
(6) A shareholder who has made an application under subsection (1) or (3) must give notice of the application to the offeror.
(7) An offeror who is given notice of an application under subsection (1) or (3) must give a copy of the notice to—
(a) any person (other than the applicant) to whom a notice has been given under section (Right of offeror to buy out minority shareholder);
(b) any person who has exercised his rights under section (Right of minority shareholder to be bought out by offeror).
(8) An offeror who makes an application under subsection (3) must give notice of the application to—
(a) any person to whom a notice has been given under section (Right of offeror to buy out minority shareholder);
(b) any person who has exercised his rights under section (Right of minority shareholder to be bought out by offeror).
(9) Where a takeover offer has not been accepted to the extent necessary for entitling the offeror to give notices under subsection (2) or (4) of section (Right of offeror to buy out minority shareholder) the court may, on an application made by him, make an order authorising him to give notices under that subsection if it is satisfied that—
(a) the offeror has after reasonable enquiry been unable to trace one or more of the persons holding shares to which the offer relates,
(b) the requirements of that subsection would have been met if the person, or all the persons, mentioned in paragraph (a) above had accepted the offer, and
(c) the consideration offered is fair and reasonable.
This is subject to subsection (10).
(10) The court may not make an order under subsection (9) unless it considers that it is just and equitable to do so having regard, in particular, to the number of shareholders who have been traced but who have not accepted the offer.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 365

Joint offers
‘(1) In the case of a takeover offer made by two or more persons jointly, this Chapter has effect as follows.
(2) The conditions for the exercise of the rights conferred by section (Right of offeror to buy out minority shareholder) are satisfied—
(a) in the case of acquisitions by virtue of acceptances of the offer, by the joint offerors acquiring or unconditionally contracting to acquire the necessary shares jointly;
(b) in other cases, by the joint offerors acquiring or unconditionally contracting to acquire the necessary shares either jointly or separately.
(3) The conditions for the exercise of the rights conferred by section (Right of minority shareholder to be bought out by offeror) are satisfied—
(a) in the case of acquisitions by virtue of acceptances of the offer, by the joint offerors acquiring or unconditionally contracting to acquire the necessary shares jointly;
(b) in other cases, by the joint offerors acquiring or contracting (whether unconditionally or subject to conditions being met) to acquire the necessary shares either jointly or separately.
(4) Subject to the following provisions, the rights and obligations of the offeror under sections (Right of offeror to buy out minority shareholder) to (Effect of requirement under section (Right of minority shareholder to be bought out by offeror)) are respectively joint rights and joint and several obligations of the joint offerors.
(5) A provision of sections (Right of offeror to buy out minority shareholder) to (Applications to the court) that requires or authorises a notice or other document to be given or sent by or to the joint offerors is complied with if the notice or document is given or sent by or to any of them (but see subsection (6)).
(6) The statutory declaration required by section (Further provision about notices given under section (Right of offeror to buy out minority shareholder))(4) must be made by all of the joint offerors and, where one or more of them is a company, signed by a director of the company.
(7) In sections (Meaning of “takeover offer”) to (Shares to which an offer relates), (Right of offeror to buy out minority shareholder)(9), (Effect of notice under section (Right of offeror to buy out minority shareholder))(6), (Right of minority shareholder to be bought out by offeror)(8) and (Associates) references to the offeror are to be read as references to the joint offerors or any of them.
(8) In section (Effect of notice under section (Right of offeror to buy out minority shareholder))(7) and (8) references to the offeror are to be read as references to the joint offerors or such of them as they may determine.
(9) In sections (Effect of notice under section (Right of offeror to buy out minority shareholder))(5)(a) and (Effect of requirement under section (Right of minority shareholder to be bought out by offeror))(5)(a) references to the offeror being no longer able to provide the relevant consideration are to be read as references to none of the joint offerors being able to do so.
(10) In section (Applications to the court) references to the offeror are to be read as references to the joint offerors, except that—
(a) an application under subsection (3) or (9) may be made by any of them, and
(b) the reference in subsection (9)(a) to the offeror having been unable to trace one or more of the persons holding shares is to be read as a reference to none of the offerors having been able to do so.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 366

Associates
‘(1) In this Chapter “associate”, in relation to an offeror, means—
(a) a nominee of the offeror,
(b) a holding company, subsidiary or fellow subsidiary of the offeror or a nominee of such a holding company, subsidiary or fellow subsidiary,
(c) a body corporate in which the offeror is substantially interested,
(d) a person who is, or is a nominee of, a party to a share acquisition agreement with the offeror, or
(e) (where the offeror is an individual) his spouse or civil partner and any minor child or step-child of his.
(2) For the purposes of subsection (1)(b) a company is a fellow subsidiary of another body corporate if both are subsidiaries of the same body corporate but neither is a subsidiary of the other.
(3) For the purposes of subsection (1)(c) an offeror has a substantial interest in a body corporate if—
(a) the body or its directors are accustomed to act in accordance with his directions or instructions, or
(b) he is entitled to exercise or control the exercise of one-third or more of the voting power at general meetings of the body.
Subsections (2) and (3) of section 630 (which contain provision about when a person is treated as entitled to exercise or control the exercise of voting power) apply for the purposes of this subsection as they apply for the purposes of that section.
(4) For the purposes of subsection (1)(d) an agreement is a share acquisition agreement if—
(a) it is an agreement for the acquisition of, or of an interest in, shares to which the offer relates,
(b) it includes provisions imposing obligations or restrictions on any one or more of the parties to it with respect to their use, retention or disposal of such shares, or their interests in such shares, acquired in pursuance of the agreement (whether or not together with any other shares to which the offer relates or any other interests of theirs in such shares), and
(c) it is not an excluded agreement (see subsection (5)).
(5) An agreement is an “excluded agreement”—
(a) if it is not legally binding, unless it involves mutuality in the undertakings, expectations or understandings of the parties to it, or
(b) if it is an agreement to underwrite or sub-underwrite an offer of shares in the company, provided the agreement is confined to that purpose and any matters incidental to it.
(6) The reference in subsection (4)(b) to the use of interests in shares is to the exercise of any rights or of any control or influence arising from those interests (including the right to enter into an agreement for the exercise, or for control of the exercise, of any of those rights by another person).
(7) In this section—
(a) “agreement” includes any agreement or arrangement;
(b) references to provisions of an agreement include—
(i) undertakings, expectations or understandings operative under an arrangement, and
(ii) any provision whether express or implied and whether absolute or not.’.—[Margaret Hodge.]

Brought up, read the First time and Second time, and added to the Bill.

New Clause 367

Convertible securities
‘(1) For the purposes of this Chapter securities of a company are treated as shares in the company if they are convertible into or entitle the holder to subscribe for such shares.
References to the holder of shares or a shareholder are to be read accordingly.
(2) Subsection (1) is not to be read as requiring any securities to be treated—
(a) as shares of the same class as those into which they are convertible or for which the holder is entitled to subscribe, or
(b) as shares of the same class as other securities by reason only that the shares into which they are convertible or for which the holder is entitled to subscribe are of the same class.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 368

Debentures carrying voting rights
‘(1) For the purposes of this Chapter debentures issued by a company to which subsection (2) applies are treated as shares in the company if they carry voting rights.
(2) This subsection applies to a company that has voting shares, or debentures carrying voting rights, which are admitted to trading on a regulated market.
(3) In this Chapter, in relation to debentures treated as shares by virtue of subsection (1)—
(a) references to the holder of shares or a shareholder are to be read accordingly;
(b) references to shares being allotted are to be read as references to debentures being issued.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 369

Interpretation
‘(1) In this Chapter—
“the company” means the company whose shares are the subject of a takeover offer;
“date of the offer” means—
(m) where the offer is published, the date of publication;
(n) where the offer is not published, or where any notices of the offer are given before the date of publication, the date when notices of the offer (or the first such notices) are given;
“non-voting shares” means shares that are not voting shares;
“offeror” means (subject to section (Joint offers)) the person making a takeover offer;
“voting rights” means rights to vote at general meetings of the company, including rights that arise only in certain circumstances;
“voting shares” means shares carrying voting rights.
(2) For the purposes of this Chapter a person contracts unconditionally to acquire shares if his entitlement under the contract to acquire them is not (or is no longer) subject to conditions or if all conditions to which it was subject have been met.
A reference to a contract becoming unconditional is to be read accordingly.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 370

Offence of fraudulent trading
‘(1) If any business of a company is carried on with intent to defraud creditors of the company or creditors of any other person, or for any fraudulent purpose, every person who is knowingly a party to the carrying on of the business in that manner commits an offence.
(2) This applies whether or not the company has been, or is in the course of being, wound up.
(3) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to imprisonment for a term not exceeding ten years or a fine (or both);
(b) on summary conviction—
(i) in England and Wales, to imprisonment for a term not exceeding twelve months or a fine not exceeding the statutory maximum (or both);
(ii) in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months or a fine not exceeding the statutory maximum (or both).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 371

Petition by company member
‘(1) A member of a company may apply to the court by petition for an order under this Part on the ground—
(a) that the company’s affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members (including at least himself), or
(b) that an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial.
(2) The provisions of this Part apply to a person who is not a member of a company but to whom shares in the company have been transferred or transmitted by operation of law as they apply to a member of a company.
(3) In this section, and so far as applicable for the purposes of this section in the other provisions of this Part, “company” means—
(a) a company within the meaning of this Act, or
(b) a company that is not such a company but is a statutory water company within the meaning of the Statutory Water Companies Act 1991 (c. 58).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 372

Petition by Secretary of State
‘(1) This section applies to a company in respect of which—
(a) the Secretary of State has received a report under section 437 of the Companies Act 1985 (c.6) (inspector’s report);
(b) the Secretary of State has exercised his powers under section 447 or 448 of that Act (powers to require documents and information or to enter and search premises);
(c) the Secretary of State or the Financial Services Authority has exercised his or its powers under Part 11 of the Financial Services and Markets Act 2000 (c.8) (information gathering and investigations); or
(d) the Secretary of State has received a report from an investigator appointed by him or the Financial Services Authority under that Part.
(2) If it appears to the Secretary of State that in the case of such a company—
(a) the company’s affairs are being or have been conducted in a manner that is unfairly prejudicial to the interests of members generally or of some part of its members, or
(b) an actual or proposed act or omission of the company (including an act or omission on its behalf) is or would be so prejudicial,
he may apply to the court by petition for an order under this Part.
(3) The Secretary of State may do this in addition to, or instead of, presenting a petition for the winding up of the company.
(4) In this section, and so far as applicable for the purposes of this section in the other provisions of this Part, “company” means any body corporate that is liable to be wound up under the Insolvency Act 1986 (c.45) or the Insolvency (Northern Ireland) Order 1989 (S.I.1989/2405(N.I.19)).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 373

Powers of the court under this Part
‘(1) If the court is satisfied that a petition under this Part is well founded, it may make such order as it thinks fit for giving relief in respect of the matters complained of.
(2) Without prejudice to the generality of subsection (1), the court’s order may—
(a) regulate the conduct of the company’s affairs in the future;
(b) require the company—
(i) to refrain from doing or continuing an act complained of, or
(ii) to do an act that the petitioner has complained it has omitted to do;
(c) authorise civil proceedings to be brought in the name and on behalf of the company by such person or persons and on such terms as the court may direct;
(d) require the company not to make any, or any specified, alterations in its articles without the leave of the court;
(e) provide for the purchase of the shares of any members of the company by other members or by the company itself and, in the case of a purchase by the company itself, the reduction of the company’s capital accordingly.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 374

Application of rule-making powers
‘The power to make rules under section 411 of the Insolvency Act 1986 or Article 359 of the Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)), so far as relating to a winding-up petition, applies for the purposes of a petition under this Part.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 375

Copy of order affecting company’s articles to be delivered to registrar
‘(1) Where an order of the court under this Part—
(a) alters the company’s articles, or
(b) gives leave for the company to make any, or any specified, alterations in its articles,
the company must deliver a copy of the order to the registrar.
(2) It must do so within 14 days from the making of the order or such longer period as the court may allow.
(3) If a company makes default in complying with this section, an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(4) A person guilty of an offence under this section is liable on summary conviction to a fine not exceeding level 3 on the standard scale and, for continued contravention, a daily default fine not exceeding one-tenth of level 3 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 376

Power to strike off company not carrying on business or in operation
‘(1) If the registrar has reasonable cause to believe that a company is not carrying on business or in operation, the registrar may send to the company by post a letter inquiring whether the company is carrying on business or in operation.
(2) If the registrar does not within one month of sending the letter receive any answer to it, the registrar must within 14 days after the expiration of that month send to the company by post a registered letter referring to the first letter, and stating—
(a) that no answer to it has been received, and
(b) that if an answer is not received to the second letter within one month from its date, a notice will be published in the Gazette with a view to striking the company’s name off the register.
(3) If the registrar—
(a) receives an answer to the effect that the company is not carrying on business or in operation, or
(b) does not within one month after sending the second letter receive any answer,
the registrar may publish in the Gazette, and send to the company by post, a notice that at the expiration of three months from the date of the notice the name of the company mentioned in it will, unless cause is shown to the contrary, be struck off the register and the company will be dissolved.
(4) At the expiration of the time mentioned in the notice the registrar may, unless cause to the contrary is previously shown by the company, strike its name off the register.
(5) The registrar must publish notice in the Gazette of the company’s name having been struck off the register.
(6) On the publication of the notice in the Gazette the company is dissolved.
(7) However—
(a) the liability (if any) of every director, managing officer and member of the company continues and may be enforced as if the company had not been dissolved, and
(b) nothing in this section affects the power of the court to wind up a company the name of which has been struck off the register.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 377

Duty to act in case of company being wound up
‘(1) If, in a case where a company is being wound up—
(a) the registrar has reasonable cause to believe—
(i) that no liquidator is acting, or
(ii) that the affairs of the company are fully wound up, and
(b) the returns required to be made by the liquidator have not been made for a period of six consecutive months,
the registrar must publish in the Gazette and send to the company or the liquidator (if any) a notice that at the expiration of three months from the date of the notice the name of the company mentioned in it will, unless cause is shown to the contrary, be struck off the register and the company will be dissolved.
(2) At the expiration of the time mentioned in the notice the registrar may, unless cause to the contrary is previously shown by the company, strike its name off the register.
(3) The registrar must publish notice in the Gazette of the company’s name having been struck off the register.
(4) On the publication of the notice in the Gazette the company is dissolved.
(5) However—
(a) the liability (if any) of every director, managing officer and member of the company continues and may be enforced as if the company had not been dissolved, and
(b) nothing in this section affects the power of the court to wind up a company the name of which has been struck off the register.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 378

Supplementary provisions as to service of letter or notice
‘(1) A letter or notice to be sent under section (Power to strike off company not carrying on business or in operation) or (Duty to act in case of company being wound up) to a company may be addressed to the company at its registered office or, if no office has been registered, to the care of some officer of the company.
(2) If there is no officer of the company whose name and address are known to the registrar, the letter or notice may be sent to each of the persons who subscribed the memorandum (if their addresses are known to the registrar).
(3) A notice to be sent to a liquidator under section (Duty to act in case of company being wound up) may be addressed to him at his last known place of business.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 379

Striking off on application by company
‘(1) On application by a company, the registrar of companies may strike the company’s name off the register.
(2) The application—
(a) must be made on the company’s behalf by its directors or by a majority of them, and
(b) must contain the prescribed information.
(3) The registrar may not strike a company off under this section until after the expiration of three months from the publication by the registrar in the Gazette of a notice—
(a) stating that the registrar may exercise the power under this section in relation to the company, and
(b) inviting any person to show cause why that should not be done.
(4) The registrar must publish notice in the Gazette of the company’s name having been struck off.
(5) On the publication of the notice in the Gazette the company is dissolved.
(6) However—
(a) the liability (if any) of every director, managing officer and member of the company continues and may be enforced as if the company had not been dissolved, and
(b) nothing in this section affects the power of the court to wind up a company the name of which has been struck off the register.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 380

Circumstances in which application not to be made: activities of company
‘(1) An application under section (Striking off on application by company) on behalf of a company must not be made if, at any time in the previous three months, the company has—
(a) changed its name,
(b) traded or otherwise carried on business,
(c) made a disposal for value of property or rights that, immediately before ceasing to trade or otherwise carry on business, it held for the purpose of disposal for gain in the normal course of trading or otherwise carrying on business, or
(d) engaged in any other activity, except one which is—
(i) necessary or expedient for the purpose of making an application under that section, or deciding whether to do so,
(ii) necessary or expedient for the purpose of concluding the affairs of the company,
(iii) necessary or expedient for the purpose of complying with any statutory requirement, or
(iv) specified by the Secretary of State by order for the purposes of this sub-paragraph.
(2) For the purposes of this section, a company is not to be treated as trading or otherwise carrying on business by virtue only of the fact that it makes a payment in respect of a liability incurred in the course of trading or otherwise carrying on business.
(3) The Secretary of State may by order amend subsection (1) for the purpose of altering the period in relation to which the doing of the things mentioned in paragraphs (a) to (d) of that subsection is relevant.
(4) An order under this section is subject to negative resolution procedure.
(5) It is an offence for a person to make an application in contravention of this section.
(6) In proceedings for such an offence it is a defence for the accused to prove that he did not know, and could not reasonably have known, of the existence of the facts that led to the contravention.
(7) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 381

Circumstances in which application not to be made: other proceedings not concluded
‘(1) An application under section (Striking off on application by company) on behalf of a company must not be made at a time when—
(a) an application to the court under Part (Arrangements and reconstructions) has been made on behalf of the company for the sanctioning of a compromise or arrangement and the matter has not been finally concluded;
(b) a voluntary arrangement in relation to the company has been proposed under Part 1 of the Insolvency Act 1986 (c. 45) or Part 2 of the Insolvency (Northern Ireland) Order 1989 (S.I.1989/2405(N.I.19)) and the matter has not been finally concluded;
(c) the company is in administration under Part 2 of that Act or Part 3 of that Order;
(d) paragraph 44 of Schedule B1 to that Act or paragraph 45 of Schedule B1 to that Order applies (interim moratorium on proceedings where application to the court for an administration order has been made or notice of intention to appoint administrator has been filed);
(e) the company is being wound up under Part 4 of that Act or Part 5 of that Order, whether voluntarily or by the court, or a petition under that Part for winding up of the company by the court has been presented and not finally dealt with or withdrawn;
(f) there is a receiver or manager of the company’s property;
(g) the company’s estate is being administered by a judicial factor.
(2) For the purposes of subsection (1)(a), the matter is finally concluded if—
(a) the application has been withdrawn,
(b) the application has been finally dealt with without a compromise or arrangement being sanctioned by the court, or
(c) a compromise or arrangement has been sanctioned by the court and has, together with anything required to be done under any provision made in relation to the matter by order of the court, been fully carried out.
(3) For the purposes of subsection (1)(b), the matter is finally concluded if—
(a) no meetings are to be summoned under section 3 of the Insolvency Act 1986 (c.45) or Article 16 of the Insolvency (Northern Ireland) Order 1989 (S.I.1989/2405(N.I.19)),
(b) meetings summoned under that section or Article fail to approve the arrangement with no, or the same, modifications,
(c) an arrangement approved by meetings summoned under that section, or in consequence of a direction under section 6(4)(b) of that Act or Article 19(4)(b) of that Order, has been fully implemented, or
(d) the court makes an order under section 6(5) of that Act or Article 19(5) of that Order revoking approval given at previous meetings and, if the court gives any directions under section 6(6) of that Act or Article 19(6) of that Order, the company has done whatever it is required to do under those directions.
(4) It is an offence for a person to make an application in contravention of this section.
(5) In proceedings for such an offence it is a defence for the accused to prove that he did not know, and could not reasonably have known, of the existence of the facts that led to the contravention.
(6) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 382

Copy of application to be given to members, employees, etc
‘(1) A person who makes an application under section (Striking off on application by company) on behalf of a company must secure that, within seven days from the day on which the application is made, a copy of it is given to every person who at any time on that day is—
(a) a member of the company,
(b) an employee of the company,
(c) a creditor of the company,
(d) a director of the company,
(e) a manager or trustee of any pension fund established for the benefit of employees of the company, or
(f) a person of a description specified for the purposes of this paragraph by regulations made by the Secretary of State.
Regulations under paragraph (f) are subject to negative resolution procedure.
(2) Subsection (1) does not require a copy of the application to be given to a director who is a party to the application.
(3) The duty imposed by this section ceases to apply if the application is withdrawn before the end of the period for giving the copy application.
(4) A person who fails to perform the duty imposed on him by this section commits an offence.
If he does so with the intention of concealing the making of the application from the person concerned, he commits an aggravated offence.
(5) In proceedings for an offence under this section it is a defence for the accused to prove that he took all reasonable steps to perform the duty.
(6) A person guilty of an offence under this section (other than an aggravated offence) is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.
(7) A person guilty of an aggravated offence under this section is liable—
(a) on conviction on indictment, to imprisonment for a term not exceeding seven years or a fine (or both);
(b) on summary conviction—
(i) in England and Wales, to imprisonment for a term not exceeding twelve months or to a fine not exceeding the statutory maximum (or both);
(ii) in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months, or to a fine not exceeding the statutory maximum (or both).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 383

Copy of application to be given to new members, employees, etc
‘(1) This section applies in relation to any time after the day on which a company makes an application under section (Striking off on application by company) (application for voluntary striking off) and before the day on which the application is finally dealt with or withdrawn.
(2) A person who is a director of the company at the end of a day on which a person (other than himself) becomes—
(a) a member of the company,
(b) an employee of the company,
(c) a creditor of the company,
(d) a director of the company,
(e) a manager or trustee of any pension fund established for the benefit of employees of the company, or
(f) a person of a description specified for the purposes of this paragraph by regulations made by the Secretary of State,
must secure that a copy of the application is given to that person within seven days from that day.
Regulations under paragraph (f) are subject to negative resolution procedure.
(3) The duty imposed by this section ceases to apply if the application is finally dealt with or withdrawn before the end of the period for giving the copy application.
(4) A person who fails to perform the duty imposed on him by this section commits an offence.
If he does so with the intention of concealing the making of the application from the person concerned, he commits an aggravated offence.
(5) In proceedings for an offence under this section it is a defence for the accused to prove—
(a) that at the time of the failure he was not aware of the fact that the company had made an application under section (Striking off on application by company), or
(b) that he took all reasonable steps to perform the duty.
(6) A person guilty of an offence under this section (other than an aggravated offence) is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.
(7) A person guilty of an aggravated offence under this section is liable—
(a) on conviction on indictment, to imprisonment for a term not exceeding seven years or a fine (or both);
(b) on summary conviction—
(i) in England and Wales, to imprisonment for a term not exceeding twelve months or to a fine not exceeding the statutory maximum (or both);
(ii) in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months, or to a fine not exceeding the statutory maximum (or both).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 384

Copy of application: provisions as to service of documents
‘(1) The following provisions have effect for the purposes of—
section (Copy of application to be given to members, employees, etc) (copy of application to be given to members, employees, etc), and
section (Copy of application to be given to new members, employees, etc) (copy of application to be given to new members, employees, etc).
(2) A document is treated as given to a person if it is—
(a) delivered to him, or
(b) left at his proper address, or
(c) sent by post to him at that address.
(3) For the purposes of subsection (2) and section 7 of the Interpretation Act 1978 (c. 30) (service of documents by post) as it applies in relation to that subsection, the proper address of a person is—
(a) in the case of a firm incorporated or formed in the United Kingdom, its registered or principal office;
(b) in the case of a firm incorporated or formed outside the United Kingdom—
(i) if it has a place of business in the United Kingdom, its principal office in the United Kingdom, or
(ii) if it does not have a place of business in the United Kingdom, its registered or principal office;
(c) in the case of an individual, his last known address.
(4) In the case of a creditor of the company a document is treated as given to him if it is left or sent by post to him—
(a) at the place of business of his with which the company has had dealings by virtue of which he is a creditor of the company, or
(b) if there is more than one such place of business, at each of them.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 385

Circumstances in which application to be withdrawn
‘(1) This section applies where, at any time on or after the day on which a company makes an application under section (Striking off on application by company) and before the day on which the application is finally dealt with or withdrawn—
(a) the company—
(i) changes its name,
(ii) trades or otherwise carries on business,
(iii) makes a disposal for value of any property or rights other than those which it was necessary or expedient for it to hold for the purpose of making, or proceeding with, an application under that section, or
(iv) engages in any activity, except one to which subsection (3) applies;
(b) an application is made to the court under Part (Arrangements and reconstructions) on behalf of the company for the sanctioning of a compromise or arrangement;
(c) a voluntary arrangement in relation to the company is proposed under Part 1 of the Insolvency Act 1986 (c.45) or Part 2 of the Insolvency (Northern Ireland) Order 1989 (S.I.1989/2405(N.I.19));
(d) an application to the court for an administration order in respect of the company is made under paragraph 12 of Schedule B1 to that Act or paragraph 13 of Schedule B1 to that Order;
(e) an administrator is appointed in respect of the company under paragraph 14 or 22 of Schedule B1 to that Act or paragraph 15 or 23 of Schedule B1 to that Order, or a copy of notice of intention to appoint an administrator of the company under any of those provisions is filed with the court;
(f) there arise any of the circumstances in which, under section 84(1) of that Act or Article 70 of that Order, the company may be voluntarily wound up;
(g) a petition is presented for the winding up of the company by the court under Part 4 of that Act or Part 5 of that Order;
(h) a receiver or manager of the company’s property is appointed; or
(i) a judicial factor is appointed to administer the company’s estate.
(2) A person who, at the end of a day on which any of the events mentioned in subsection (1) occurs, is a director of the company must secure that the company’s application is withdrawn forthwith.
(3) For the purposes of subsection (1)(a), a company is not treated as trading or otherwise carrying on business by virtue only of the fact that it makes a payment in respect of a liability incurred in the course of trading or otherwise carrying on business.
(4) The excepted activities referred to in subsection (1)(a)(iv) are—
(a) any activity necessary or expedient—
(i) for the purpose of making, or proceeding with, an application under section (Striking off on application by company), or
(ii) for the purpose of concluding affairs of the company that are outstanding because of what has been necessary or expedient for the purpose of making, or proceeding with, such an application;
(b) any activity necessary or expedient for the purpose of complying with any statutory requirement;
(c) any activity specified by the Secretary of State by order for the purposes of this subsection.
An order under paragraph (c) is subject to negative resolution procedure.
(5) A person who fails to perform the duty imposed on him by this section commits an offence.
(6) In proceedings for an offence under this section it is a defence for the accused to prove—
(a) that at the time of the failure he was not aware of the fact that the company had made an application under section (Striking off on application by company), or
(b) that he took all reasonable steps to perform the duty.
(7) A person guilty of an offence under this section is liable—
(a) on conviction on indictment, to a fine;
(b) on summary conviction, to a fine not exceeding the statutory maximum.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 386

Withdrawal of application
‘An application under section (Striking off on application by company) is withdrawn by notice to the registrar.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 387

Meaning of “creditor”
‘In this Chapter “creditor” includes a contingent or prospective creditor.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 388

Property of dissolved company to be bona vacantia
‘(1) When a company is dissolved, all property and rights whatsoever vested in or held on trust for the company immediately before its dissolution (including leasehold property, but not including property held by the company on trust for another person) are deemed to be bona vacantia and—
(a) accordingly belong to the Crown, or to the Duchy of Lancaster or to the Duke of Cornwall for the time being (as the case may be), and
(b) vest and may be dealt with in the same manner as other bona vacantia accruing to the Crown, to the Duchy of Lancaster or to the Duke of Cornwall.
(2) Subsection (1) has effect subject to the possible restoration of the company to the register under Chapter (Restoration to the register) of this Part (see section (Effect of restoration to the register where property has vested as bona vacantia)).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 389

Crown disclaimer of property vesting as bona vacantia
‘(1) Where property vests in the Crown under section (Property of dissolved company to be bona vacantia), the Crown’s title to it under that section may be disclaimed by a notice signed by the Crown representative, that is to say the Treasury Solicitor, or, in relation to property in Scotland, the Queen’s and Lord Treasurer’s Remembrancer.
(2) The right to execute a notice of disclaimer under this section may be waived by or on behalf of the Crown either expressly or by taking possession or other act evincing that intention.
(3) A notice of disclaimer must be executed within three years after—
(a) the date on which the fact that the property may have vested in the Crown under section (Property of dissolved company to be bona vacantia) first comes to the notice of the Crown representative, or
(b) if ownership of the property is not established at that date, the end of the period reasonably necessary for the Crown representative to establish the ownership of the property.
(4) If an application in writing is made to the Crown representative by a person interested in the property requiring him to decide whether he will or will not disclaim, any notice of disclaimer must be executed within twelve months after the making of the application or such further period as may be allowed by the court.
(5) A notice of disclaimer under this section is of no effect if it is shown to have been executed after the end of the period specified by subsection (3) or (4).
(6) A notice of disclaimer under this section must be delivered to the registrar and retained and registered by him.
(7) Copies of it must be published in the Gazette and sent to any persons who have given the Crown representative notice that they claim to be interested in the property.
(8) This section applies to property vested in the Duchy of Lancaster or the Duke of Cornwall under section (Property of dissolved company to be bona vacantia) as if for references to the Crown and the Crown representative there were respectively substituted references to the Duchy of Lancaster and to the Solicitor to that Duchy, or to the Duke of Cornwall and to the Solicitor to the Duchy of Cornwall, as the case may be.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 390

Effect of Crown disclaimer
‘(1) Where notice of disclaimer is executed under section (Crown disclaimer of property vesting as bona vacantia) as respects any property, that property is deemed not to have vested in the Crown under section (Property of dissolved company to be bona vacantia).
(2) The following sections contain provisions as to the effect of the Crown disclaimer—
sections (General effect of disclaimer (EW and NI)) to (Land subject to rentcharge) apply in relation to property in England and Wales or Northern Ireland;
sections (General effect of disclaimer (Sc)) to (Protection of persons holding under a lease (Sc)) apply in relation to property in Scotland.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 391

General effect of disclaimer (EW and NI)
‘(1) The Crown’s disclaimer operates so as to determine, as from the date of the disclaimer, the rights, interests and liabilities of the company in or in respect of the property disclaimed.
(2) It does not, except so far as is necessary for the purpose of releasing the company from any liability, affect the rights or liabilities of any other person.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 392

Disclaimer of leaseholds (EW and NI)
‘(1) The disclaimer of any property of a leasehold character does not take effect unless a copy of the disclaimer has been served (so far as the Crown representative is aware of their addresses) on every person claiming under the company as underlessee or mortgagee, and either—
(a) no application under section (Power of court to make vesting order (EW and NI)) below is made with respect to that property before the end of the period of 14 days beginning with the day on which the last notice under this paragraph was served, or
(b) where such an application has been made, the court directs that the disclaimer shall take effect.
(2) Where the court gives a direction under subsection (1)(b) it may also, instead of or in addition to any order it makes under section (Protection of persons holding under a lease (EW and NI), make such order as it thinks fit with respect to fixtures, tenant’s improvements and other matters arising out of the lease.
(3) In this section the “Crown representative” means—
(a) in relation to property vested in the Duchy of Lancaster, the Solicitor to that Duchy;
(b) in relation to property vested in the Duke of Cornwall, the Solicitor to the Duchy of Cornwall;
(c) in relation to property in Scotland, the Queen’s and Lord Treasurer’s Remembrancer;
(d) in relation to other property, the Treasury Solicitor.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 393

Power of court to make vesting order (EW and NI)
‘(1) The court may on application by a person who—
(a) claims an interest in the disclaimed property, or
(b) is under a liability in respect of the disclaimed property that is not discharged by the disclaimer,
make an order under this section in respect of the property.
(2) An order under this section is an order for the vesting of the disclaimed property in, or its delivery to—
(a) a person entitled to it (or a trustee for such a person), or
(b) a person subject to such a liability as is mentioned in subsection (1)(b) (or a trustee for such a person).
(3) An order under subsection (2)(b) may only be made where it appears to the court that it would be just to do so for the purpose of compensating the person subject to the liability in respect of the disclaimer.
(4) An order under this section may be made on such terms as the court thinks fit.
(5) On a vesting order being made under this section, the property comprised in it vests in the person named in that behalf in the order without conveyance, assignment or transfer.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 394

Protection of persons holding under a lease (EW and NI)
‘(1) The court must not make an order under section (Power of court to make vesting order (EW and NI)) vesting property of a leasehold nature in a person claiming under the company as underlessee or mortgagee except on terms making that person—
(a) subject to the same liabilities and obligations as those to which the company was subject under the lease, or
(b) if the court thinks fit, subject to the same liabilities and obligations as if the lease had been assigned to him.
(2) Where the order relates to only part of the property comprised in the lease, subsection (1) applies as if the lease had comprised only the property comprised in the vesting order.
(3) A person claiming under the company as underlessee or mortgagee who declines to accept a vesting order on such terms is excluded from all interest in the property.
(4) If there is no person claiming under the company who is willing to accept an order on such terms, the court has power to vest the company’s estate and interest in the property in any person who is liable (whether personally or in a representative character, and whether alone or jointly with the company) to perform the lessee’s covenants in the lease.
(5) The court may vest that estate and interest in such a person freed and discharged from all estates, incumbrances and interests created by the company.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 395

Land subject to rentcharge (EW and NI)
‘Where in consequence of the disclaimer land vests in any person, neither he nor his successors in title are subject to any personal liability in respect of sums becoming due under the rentcharge, except sums becoming due after he, or some person claiming under or through him, has taken possession or control of the land or has entered into occupation of it.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 396

General effect of disclaimer (Sc)
‘(1) The Crown’s disclaimer operates to determine, as from the date of the disclaimer, the rights, interests and liabilities of the company, and the property of the company, in or in respect of the property disclaimed.
(2) It does not (except so far as is necessary for the purpose of releasing the company and its property from liability) affect the rights or liabilities of any other person.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 397

Power of court to make vesting order (Sc)
‘(1) The court may—
(a) on application by a person who either claims an interest in disclaimed property or is under a liability not discharged by this Act in respect of disclaimed property, and
(b) on hearing such persons as it thinks fit,
make an order for the vesting of the property in or its delivery to any persons entitled to it, or to whom it may seem just that the property should be delivered by way of compensation for such liability, or a trustee for him.
(2) The order may be made on such terms as the court thinks fit.
(3) On a vesting order being made under this section, the property comprised in it vests accordingly in the person named in that behalf in the order, without conveyance or assignation for that purpose.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 398

Protection of persons holding under a lease (Sc)
‘(1) Where the property disclaimed is held under a lease in favour of a person claiming under the company, whether—
(a) as sub-lessee, or
(b) as creditor in a duly registered or (as the case may be) recorded heritable security over a lease,
the court must not make a vesting order except on the following terms.
(2) The person must by the order be made subject—
(a) to the same liabilities and obligations as those to which the company was subject under the lease in respect of the property, or
(b) if the court thinks fit, to the same liabilities and obligations as if the lease had been assigned to him.
In either event (if the case so requires) the liabilities and obligations must be as if the lease had comprised only the property comprised in the vesting order.
(3) A sub-lessee or creditor declining to accept a vesting order on such terms is excluded from all interest in and security over the property.
(4) If there is no person claiming under the company who is willing to accept an order on such terms, the court has power to vest the company’s estate and interest in the property in any person liable (either personally or in a representative character, and either alone or jointly with the company) to perform the lessee’s obligations under the lease.
(5) The court may vest that estate and interest in such a person freed and discharged from all interests, rights and obligations created by the company in the lease or in relation to the lease.
(6) For the purposes of this section a heritable security—
(a) is duly recorded if it is recorded in the Register of Sasines, and
(b) is duly registered if registered in accordance with the Land Registration (Scotland) Act 1979 (c. 33).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 399

Liability for rentcharge on company’s land after dissolution
‘(1) This section applies where on the dissolution of a company land in England and Wales or Northern Ireland that is subject to a rentcharge vests by operation of law in the Crown or any other person (“the proprietor”).
(2) Neither the proprietor nor his successors in title are subject to any personal liability in respect of sums becoming due under the rentcharge, except sums becoming due after the proprietor, or some person claiming under or through him, has taken possession or control of the land or has entered into occupation of it.
(3) In this section “company” includes any body corporate.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 400

Application for administrative restoration to the register
‘(1) An application may be made to the registrar to restore to the register a company that has been struck off the register under section (Power to strike off company not carrying on business or in operation) or (Duty to act in case of company being wound up) (power of registrar to strike off defunct company).
(2) An application under this section may be made whether or not the company has in consequence been dissolved.
(3) An application under this section may only be made by a former director or former member of the company.
(4) An application under this section may not be made after the end of the period of six years from the date of the dissolution of the company.
For this purpose an application is made when it is received by the registrar.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 401

Requirements for administrative restoration
‘(1) On an application under section (Application for administrative restoration to the register) the registrar shall restore the company to the register if, and only if, the following conditions are met.
(2) The first condition is that the company was carrying on business or in operation at the time of its striking off.
(3) The second condition is that, if any property or right previously vested in or held on trust for the company has vested as bona vacantia, the Crown representative has signified to the registrar in writing consent to the company’s restoration to the register.
(4) It is the applicant’s responsibility to obtain that consent and to pay any costs (in Scotland, expenses) of the Crown representative—
(a) in dealing with the property during the period of dissolution, or
(b) in connection with the proceedings on the application,
that may be demanded as a condition of giving consent.
(5) The third condition is that the applicant has—
(a) delivered to the registrar such documents relating to the company as are necessary to bring up to date the records kept by the registrar, and
(b) paid any penalties under section 437 or corresponding earlier provisions (civil penalty for failure to deliver accounts) that were outstanding at the date of dissolution or striking off.
(6) In this section the “Crown representative” means—
(a) in relation to property vested in the Duchy of Lancaster, the Solicitor to that Duchy;
(b) in relation to property vested in the Duke of Cornwall, the Solicitor to the Duchy of Cornwall;
(c) in relation to property in Scotland, the Queen’s and Lord Treasurer’s Remembrancer;
(d) in relation to other property, the Treasury Solicitor.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 402

Application to be accompanied by statement of compliance
‘(1) An application under section (Application for administrative restoration to the register) (application for administrative restoration to the register) must be accompanied by a statement of compliance.
(2) The statement of compliance required is a statement—
(a) that the person making the application has standing to apply (see subsection (3) of that section), and
(b) that the requirements for administrative restoration (see section (Requirements for administrative restoration)) are met.
(3) The registrar may accept the statement of compliance as sufficient evidence of those matters.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 403

Registrar’s decision on application for administrative restoration
‘(1) The registrar must give notice to the applicant of the decision on an application under section (Application for administrative restoration to the register) (application for administrative restoration to the register).
(2) If the decision is that the company should be restored to the register, the restoration takes effect as from the date that notice is sent.
(3) In the case of such a decision, the registrar must—
(a) enter on the register a note of the date as from which the company’s restoration to the register takes effect, and
(b) cause notice of the restoration to be published in the Gazette.
(4) The notice under subsection (3)(b) must state—
(a) the name of the company or, if the company is restored to the register under a different name, that name and its former name,
(b) the company’s registered number, and
(c) the date as from which the restoration of the company to the register takes effect.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 404

Effect of administrative restoration
‘(1) The general effect of administrative restoration to the register is that the company is deemed to have continued in existence as if it had not been dissolved or struck off the register.
(2) The company is not liable to a penalty under section 458 or any corresponding earlier provision (civil penalty for failure to deliver accounts) for a financial year in relation to which the period for filing accounts and reports ended—
(a) after the date of dissolution or striking off, and
(b) before the restoration of the company to the register.
(3) The court may give such directions and make such provision as seems just for placing the company and all other persons in the same position (as nearly as may be) as if the company had not been dissolved or struck off the register.
(4) An application to the court for such directions or provision may be made any time within three years after the date of restoration of the company to the register.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 405

Application to court for restoration to the register
‘(1) An application may be made to the court to restore to the register a company—
(a) that has been dissolved under Chapter 9 of Part 4 of the Insolvency Act 1986 (c. 45) or Chapter 9 of Part 5 of the Insolvency (Northern Ireland) Order 1989 (S.I.1989/2405 (N.I.19)) (dissolution of company after winding up),
(b) that is deemed to have been dissolved under paragraph 84(6) of Schedule B1 to that Act or paragraph 85(6) of Schedule B1 to that Order (dissolution of company following administration), or
(c) that has been struck off the register—
(i) under section (Power to strike off company not carrying on business or in operation) or (Duty to act in case of company being wound up) (power of registrar to strike off defunct company), or
(ii) under section (Striking off on application by company) (voluntary striking off),
whether or not the company has in consequence been dissolved.
(2) An application under this section may be made by—
(a) the Secretary of State,
(b) any former director of the company,
(c) any person having an interest in land in which the company had a superior or derivative interest,
(d) any person having an interest in land or other property—
(i) that was subject to rights vested in the company, or
(ii) that was benefited by obligations owed by the company,
(e) any person who but for the company’s dissolution would have been in a contractual relationship with it,
(f) any person with a potential legal claim against the company,
(g) any manager or trustee of a pension fund established for the benefit of employees of the company,
(h) any former member of the company (or the personal representatives of such a person),
(i) any person who was a creditor of the company at the time of its striking off or dissolution,
(j) any former liquidator of the company,
(k) where the company was struck off the register under section (Striking off on application by company) (voluntary striking off), any person of a description specified by regulations under section (Copy of application to be given to members, employees, etc)(1)(f) or (Copy of application to be given to new members, employees, etc)(2)(f) (persons entitled to notice of application for voluntary striking off),
or by any other person appearing to the court to have an interest in the matter.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 406

When application to the court may be made
‘(1) An application to the court for restoration of a company to the register may be made at any time for the purpose of bringing proceedings against the company for damages for personal injury.
(2) No order shall be made on such an application if it appears to the court that the proceedings would fail by virtue of any enactment as to the time within which proceedings must be brought.
(3) In making that decision the court must have regard to its power under section (Effect of court order for restoration to the register)(3) (power to give consequential directions etc) to direct that the period between the dissolution (or striking off) of the company and the making of the order is not to count for the purposes of any such enactment.
(4) In any other case an application to the court for restoration of a company to the register may not be made after the end of the period of six years from the date of the dissolution of the company, subject as follows.
(5) In a case where—
(a) the company has been struck off the register under section (Power to strike off company not carrying on business or in operation) or (Duty to act in case of company being wound up) (power of registrar to strike off defunct company),
(b) an application to the registrar has been made under section (Application for administrative restoration to the register) (application for administrative restoration to the register) within the time allowed for making such an application, and
(c) the registrar has refused the application,
an application to the court under this section may be made within 28 days of notice of the registrar’s decision being issued by the registrar, even if the period of six years mentioned in subsection (4) above has expired.
(6) For the purposes of this section—
(a) “personal injury” includes any disease and any impairment of a person’s physical or mental condition; and
(b) references to damages for personal injury include—
(i) any sum claimed by virtue of section 1(2)(c) of the Law Reform (Miscellaneous Provisions) Act 1934 (c.41) or section 14(2)(c) of the Law Reform (Miscellaneous Provisions) Act (Northern Ireland) 1937 (1937 c.9(N.I.)) (funeral expenses)), and
(ii) damages under the Fatal Accidents Act 1976 (c.30), the Damages (Scotland) Act 1976 (c.13) or the Fatal Accidents (Northern Ireland) Order 1977 (S.I.1977/1251 (N.I.18)).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 407

Decision on application for restoration by the court
‘(1) On an application under section (Application to court for restoration to the register) the court may order the restoration of the company to the register—
(a) if the company was struck off the register under section (Power to strike off company not carrying on business or in operation) or (Duty to act in case of company being wound up) (power of registrar to strike off defunct companies) and the company was, at the time of the striking off, carrying on business or in operation;
(b) if the company was struck off the register under section (Striking off on application by company) (voluntary striking off) and any of the requirements of section (Circumstances in which application not to be made: activities of company) to (Circumstances in which application to be withdrawn) was not complied with;
(c) if in any other case the court considers it just to do so.
(2) If the court orders restoration of the company to the register, the restoration takes effect on a copy of the court’s order being delivered to the registrar.
(3) The registrar must cause to be published in the Gazette notice of the restoration of the company to the register.
(4) The notice must state—
(a) the name of the company or, if the company is restored to the register under a different name, that name and its former name,
(b) the company’s registered number, and
(c) the date on which the restoration took effect.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 408

Effect of court order for restoration to the register
‘(1) The general effect of an order by the court for restoration to the register is that the company is deemed to have continued in existence as if it had not been dissolved or struck off the register.
(2) The company is not liable to a penalty under section 458 or any corresponding earlier provision (civil penalty for failure to deliver accounts) for a financial year in relation to which the period for filing accounts and reports ended—
(a) after the date of dissolution or striking off, and
(b) before the restoration of the company to the register.
(3) The court may give such directions and make such provision as seems just for placing the company and all other persons in the same position (as nearly as may be) as if the company had not been dissolved or struck off the register.
(4) The court may also give directions as to—
(a) the delivery to the registrar of such documents relating to the company as are necessary to bring up to date the records kept by the registrar,
(b) the payment of the costs (in Scotland, expenses) of the registrar in connection with the proceedings for the restoration of the company to the register,
(c) where any property or right previously vested in or held on trust for the company has vested as bona vacantia, the payment of the costs (in Scotland, expenses) of the Crown representative—
(i) in dealing with the property during the period of dissolution, or
(ii) in connection with the proceedings on the application.
(5) In this section the “Crown representative” means—
(a) in relation to property vested in the Duchy of Lancaster, the Solicitor to that Duchy;
(b) in relation to property vested in the Duke of Cornwall, the Solicitor to the Duchy of Cornwall;
(c) in relation to property in Scotland, the Queen’s and Lord Treasurer’s Remembrancer;
(d) in relation to other property, the Treasury Solicitor.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 409

Company’s name on restoration
‘(1) A company is restored to the register with the name it had before it was dissolved or struck off the register, subject to the following provisions.
(2) If at the date of restoration the company could not be registered under its former name without contravening section 67 (name not to be the same as another in the registrar’s index of company names), it must be restored to the register—
(a) under another name specified—
(i) in the case of administrative restoration, in the application to the registrar, or
(ii) in the case of restoration under a court order, in the court’s order, or
(b) as if its registered number was also its name.
References to a company’s being registered in a name and to registration, in that context, shall be read as including the company’s being restored to the register.
(3) If a company is restored to the register under a name specified in the application to the registrar, the provisions of—
section 80 (change of name: registration and issue of new certificate of incorporation), and
section 81 (change of name: effect),
apply as if the application to the registrar were notice of a change of name.
(4) If a company is restored to the register under a name specified in the court’s order, the provisions of—
section 80 (change of name: registration and issue of new certificate of incorporation), and
section 81 (change of name: effect),
apply as if the copy of the court order delivered to the registrar were notice of a change a name.
(5) If the company is restored to the register as if its registered number was also its name—
(a) the company must change its name within 14 days after the date of the restoration,
(b) the change may be made by resolution of the directors (without prejudice to any other method of changing the company’s name),
(c) the company must give notice to the registrar of the change, and
(d) sections 80 and 81 apply as regards the registration and effect of the change.
(6) If the company fails to comply with subsection (5)(a) or (c) an offence is committed by—
(a) the company, and
(b) every officer of the company who is in default.
(7) A person guilty of an offence under subsection (6) is liable on summary conviction to a fine not exceeding level 5 on the standard scale and, for continued contravention, to a daily default fine not exceeding one-tenth of level 5 on the standard scale.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 410

Effect of restoration to the register where property has vested as bona vacantia
‘(1) The person in whom any property or right is vested by section (Property of dissolved company to be bona vacantia) (property of dissolved company to be bona vacantia) may dispose of, or of an interest in, that property or right despite the fact that the company may be restored to the register under this Chapter.
(2) If the company is restored to the register—
(a) the restoration does not affect the disposition (but without prejudice to its effect in relation to any other property or right previously vested in or held on trust for the company), and
(b) the Crown or, as the case may be, the Duke of Cornwall shall pay to the company an amount equal to—
(i) the amount of any consideration received for the property or right or, as the case may be, the interest in it, or
(ii) the value of any such consideration at the time of the disposition,
or, if no consideration was received an amount equal to the value of the property, right or interest disposed of, as at the date of the disposition.
(3) There may be deducted from the amount payable under subsection (2)(b) the reasonable costs of the Crown representative in connection with the disposition (to the extent that they have not been paid as a condition of administrative restoration or pursuant to a court order for restoration).
(4) Where a liability accrues under subsection (2) in respect of any property or right which before the restoration of the company to the register had accrued as bona vacantia to the Duchy of Lancaster, the Attorney General of that Duchy shall represent Her Majesty in any proceedings arising in connection with that liability.
(5) Where a liability accrues under subsection (2) in respect of any property or right which before the restoration of the company to the register had accrued as bona vacantia to the Duchy of Cornwall, such persons as the Duke of Cornwall (or other possessor for the time being of the Duchy) may appoint shall represent the Duke (or other possessor) in any proceedings arising out of that liability.
(6) In this section the “Crown representative” means—
(a) in relation to property vested in the Duchy of Lancaster, the Solicitor to that Duchy;
(b) in relation to property vested in the Duke of Cornwall, the Solicitor to the Duchy of Cornwall;
(c) in relation to property in Scotland, the Queen’s and Lord Treasurer’s Remembrancer;
(d) in relation to other property, the Treasury Solicitor.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 411

Production and inspection of documents where offence suspected
‘(1) An application under this section may be made—
(a) in England and Wales, to a judge of the High Court by the Director of Public Prosecutions, the Secretary of State or a chief officer of police;
(b) in Scotland, to one of the Lords Commissioners of Justiciary by the Lord Advocate;
(c) in Northern Ireland, to the High Court by the Director of Public Prosecutions for Northern Ireland, the Department of Enterprise, Trade and Investment or a chief superintendent of the Police Service of Northern Ireland.
(2) If on an application under this section there is shown to be reasonable cause to believe—
(a) that any person has, while an officer of a company, committed an offence in connection with the management of the company’s affairs, and
(b) that evidence of the commission of the offence is to be found in any documents in the possession or control of the company,
an order under this section may be made.
(3) The order may—
(a) authorise any person named in it to inspect the documents in question, or any of them, for the purpose of investigating and obtaining evidence of the offence, or
(b) require the secretary of the company, or such other officer of it as may be named in the order, to produce the documents (or any of them) to a person named in the order at a place so named.
(4) This section applies also in relation to documents in the possession or control of a person carrying on the business of banking, so far as they relate to the company’s affairs, as it applies to documents in the possession or control of the company, except that no such order as is referred to in subsection (3)(b) may be made by virtue of this subsection.
(5) The decision under this section of a judge of the High Court, any of the Lords Commissioners of Justiciary or the High Court is not appealable.
(6) In this section “document” includes information recorded in any form.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 412

Application of valuation requirements
‘The provisions of sections (Valuation by qualified independent person) to (Valuer entitled to full disclosure) apply to the valuation and report required by—
section 93 (re-registration as public company: valuation of recently transferred non-cash asset);
section (Public company: valuation of non-cash consideration for shares) (allotment of shares of public company in consideration of non-cash asset);
section (Public company: agreement for transfer of non-cash asset in initial period) (transfer of non-cash asset to public company).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 413

Valuation by qualified independent person
‘(1) The valuation and report must be made by a person (“the valuer”) who—
(a) is eligible for appointment as a statutory auditor (see section 841, and
(b) meets the independence requirement in section (The independence requirement).
(2) However, where it appears to the valuer to be reasonable for the valuation of the consideration, or part of it, to be made by (or for him to accept a valuation made by) another person who—
(a) appears to him to have the requisite knowledge and experience to value the consideration or that part of it, and
(b) is not an officer or employee of—
(i) the company, or
(ii) any other body corporate that is that company’s subsidiary or holding company or a subsidiary of that company’s holding company,
or a partner of or employed by any such officer or employee,
he may arrange for or accept such a valuation, together with a report which will enable him to make his own report under this section.
(3) The references in subsection (2)(b) to an officer or employee do not include an auditor.
(4) Where the consideration or part of it is valued by a person other than the valuer himself, the latter’s report must state that fact and shall also—
(a) state the former’s name and what knowledge and experience he has to carry out the valuation, and
(b) describe so much of the consideration as was valued by the other person, and the method used to value it, and specify the date of that valuation.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 414

The independence requirement
‘(1) A person meets the independence requirement for the purposes of section (Valuation by qualified independent person) only if—
(a) he is not—
(i) an officer or employee of the company, or
(ii) a partner or employee of such a person, or a partnership of which such a person is a partner;
(b) he is not—
(i) an officer or employee of an associated undertaking of the company, or
(ii) a partner or employee of such a person, or a partnership of which such a person is a partner; and
(c) there does not exist between—
(i) the person or an associate of his, and
(ii) the company or an associated undertaking of the company,
a connection of any such description as may be specified by regulations made by the Secretary of State.
(2) An auditor of the company is not regarded as an officer or employee of the company for this purpose.
(3) In this section—
“associated undertaking” means—
(o) a parent undertaking or subsidiary undertaking of the company, or
(p) a subsidiary undertaking of a parent undertaking of the company; and
“associate” has the meaning given by section (Meaning of “associate”).
(4) Regulations under this section are subject to negative resolution procedure.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 415

Meaning of “associate”
‘(1) This section defines “associate” for the purposes of section (The independence requirement) (valuation: independence requirement).
(2) In relation to an individual, “associate” means—
(a) that individual’s spouse or civil partner or minor child or step-child,
(b) any body corporate of which that individual is a director, and
(c) any employee or partner of that individual.
(3) In relation to a body corporate, “associate” means—
(a) any body corporate of which that body is a director,
(b) any body corporate in the same group as that body, and
(c) any employee or partner of that body or of any body corporate in the same group.
(4) In relation to a partnership that is a legal person under the law by which it is governed, “associate” means—
(a) any body corporate of which that partnership is a director,
(b) any employee of or partner in that partnership, and
(c) any person who is an associate of a partner in that partnership.
(5) In relation to a partnership that is not a legal person under the law by which it is governed, “associate” means any person who is an associate of any of the partners.
(6) In this section, in relation to a limited liability partnership, for “director” read “member”.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 416

Valuer entitled to full disclosure
‘(1) A person carrying out a valuation or making a report with respect to any consideration proposed to be accepted or given by a company, is entitled to require from the officers of the company such information and explanation as he thinks necessary to enable him to—
(a) carry out the valuation or make the report, and
(b) provide any note required by section (Non-cash consideration for shares: requirements as to valuation and report)(3) or (Agreement for transfer of non-cash asset: requirements as to valuation and report)(3) (note required where valuation carried out by another person).
(2) A person who knowingly or recklessly makes a statement to which this subsection applies that is misleading, false or deceptive in a material particular commits an offence.
(3) Subsection (2) applies to a statement—
(a) made (whether orally or in writing) to a person carrying out a valuation or making a report, and
(b) conveying or purporting to convey any information or explanation which that person requires, or is entitled to require, under subsection (1).
(4) A person guilty of an offence under subsection (2) is liable—
(a) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both);
(b) on summary conviction—
(i) in England and Wales, to imprisonment for a term not exceeding twelve months or to a fine not exceeding the statutory maximum (or both);
(ii) in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months, or to a fine not exceeding the statutory maximum (or both).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 417

Meaning of “subsidiary” etc
‘(1) A company is a “subsidiary” of another company, its “holding company”, if that other company—
(a) hold a majority of the voting rights in it, or
(b) is a member of it and has the right to appoint or remove a majority of its board of directors, or
(c) is a member of it and controls alone, pursuant to an agreement with other members, a majority of the voting rights in it,
or if it is a subsidiary of a company that is itself a subsidiary of that other company.
(2) A company is a “wholly-owned subsidiary” of another company if it has no members except that other and that other’s wholly-owned subsidiaries or persons acting on behalf of that other or its wholly-owned subsidiaries.
(3) Schedule 1 contains provisions explaining expressions used in this section and otherwise supplementing this section.
(4) In this section and that Schedule “company” includes any body corporate.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 418

Meaning of “subsidiary” etc: power to amend
‘(1) The Secretary of State may by regulations amend the provisions of section (Meaning of “subsidiary” etc) (meaning of “subsidiary” etc) and Schedule (Meaning of “subsidiary” etc: supplementary provisions) (meaning of “subsidiary” etc: supplementary provisions) so as to alter the meaning of the expressions “subsidiary”, “holding company” or “wholly-owned subsidiary”.
(2) Regulations under this section are subject to negative resolution procedure.
(3) Any amendment made by regulations under this section does not apply for the purposes of enactments outside the Companies Acts unless the regulations so provide.
(4) So much of section 23(3) of the Interpretation Act 1978 (c. 30) as applies section 17(2)(a) of that Act (effect of repeal and re-enactment) to deeds, instruments and documents other than enactments does not apply in relation to any repeal and re-enactment effected by regulations under this section.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 419

Meaning of “banking company” and “banking group”
‘(1) This section defines “banking company” and “banking group” for the purposes of the Companies Acts.
(2) “Banking company” means a person who has permission under Part 4 of the Financial Services and Markets Act 2000 (c.8) to accept deposits, other than—
(a) a person who is not a company, and
(b) a person who has such permission only for the purpose of carrying on another regulated activity in accordance with permission under that Part.
(3) The definition in subsection (2) must be read with section 22 of that Act, any relevant order under that section and Schedule 2 to that Act.
(4) References to a banking group are to a group where the parent company is a banking company or where—
(a) the parent company’s principal subsidiary undertakings are wholly or mainly credit institutions, and
(b) the parent company does not itself carry on any material business apart from the acquisition, management and disposal of interests in subsidiary undertakings.
“Group” here means a parent undertaking and its subsidiary undertakings.
(5) For the purposes of subsection (4)—
(a) a parent company’s principal subsidiary undertakings are the subsidiary undertakings of the company whose results or financial position would principally affect the figures shown in the group accounts, and
(b) the management of interests in subsidiary undertakings includes the provision of services to such undertakings.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 420

Meaning of “insurance company” and related expressions
‘(1) This section defines “insurance company”, “authorised insurance company”, “insurance group” and “insurance market activity” for the purposes of the Companies Acts.
(2) An “authorised insurance company” means a person (whether incorporated or not) who has permission under Part 4 of the Financial Services and Markets Act 2000 (c. 8) to effect or carry out contracts of insurance.
(3) An “insurance company” means—
(a) an authorised insurance company, or
(b) any other person (whether incorporated or not) who—
(i) carries on insurance market activity, or
(ii) may effect or carry out contracts of insurance under which the benefits provided by that person are exclusively or primarily benefits in kind in the event of accident to or breakdown of a vehicle.
(4) Neither expression includes a friendly society within the meaning of the Friendly Societies Act 1992 (c.40).
(5) References to an insurance group are to a group where the parent company is an insurance company or where—
(a) the parent company’s principal subsidiary undertakings are wholly or mainly insurance companies, and
(b) the parent company does not itself carry on any material business apart from the acquisition, management and disposal of interests in subsidiary undertakings.
“Group” here means a parent undertaking and its subsidiary undertakings.
(6) For the purposes of subsection (5)—
(a) a parent company’s principal subsidiary undertakings are the subsidiary undertakings of the company whose results or financial position would principally affect the figures shown in the group accounts, and
(b) the management of interests in subsidiary undertakings includes the provision of services to such undertakings.
(7) “Insurance market activity” has the meaning given in section 316(3) of the Financial Services and Markets Act 2000 (c.8).
(8) References in this section to contracts of insurance and to the effecting or carrying out of such contracts must be read with section 22 of that Act, any relevant order under that section and Schedule 2 to that Act.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 421

“Employees’ share scheme”
‘For the purposes of the Companies Acts an employees’ share scheme is a scheme for encouraging or facilitating the holding of shares in or debentures of a company by or for the benefit of—
(a) the bona fide employees or former employees of—
(i) the company,
(ii) any subsidiary of the company, or
(iii) the company’s holding company or any subsidiary of the company’s holding company, or
(b) the spouses, civil partners, surviving spouses, surviving civil partners, or minor children or step-children of such employees or former employees.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 422

Meaning of “prescribed”
‘In the Companies Acts “prescribed” means prescribed (by order or by regulations) by the Secretary of State.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 423

Persons subject to foreign restrictions
‘(1) This section defines what is meant by references in this Part to a person being subject to foreign restrictions.
(2) A person is subject to foreign restrictions if under the law of a country or territory outside the United Kingdom—
(a) he is, by reason of misconduct or unfitness, disqualified to any extent from acting in connection with the affairs of a company,
(b) he is, by reason of misconduct or unfitness, required—
(i) to obtain permission from a court or other authority, or
(ii) to meet any other condition,
before acting in connection with the affairs of a company,
(c) he has, by reason of misconduct or unfitness, given undertakings to a court or other authority of a country or territory outside the United Kingdom—
(i) not to act in connection with the affairs of a company, or
(ii) restricting the extent to which, or the way in which, he may do so.
(3) The references in subsection (2) to acting in connection with the affairs of a company are to doing any of the following—
(a) being a director of a company,
(b) acting as receiver of a company’s property, or
(c) being concerned or taking part in the promotion, formation or management of a company.
(4) In this section—
(a) “company” means a company incorporated or formed under the law of the country or territory in question, and
(b) in relation to such a company—
“director” means the holder of an office corresponding to that of director of a UK company; and
“receiver” includes any corresponding officer under the law of that country or territory.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 424

Meaning of “the court” and “UK company”
‘In this Part—
“the court” means—
(q) in England and Wales, the High Court or a county court;
(r) in Scotland, the Court of Session or the sheriff court;
(s) in Northern Ireland, the High Court;
“UK company” means a body corporate that—
(t) is a company as defined in section 1 of this Act, or
(u) is registered under the Companies Acts by virtue of section 694 (bodies not formed under Companies Acts but authorised to register).’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 425

Disqualification of persons subject to foreign restrictions
‘(1) The Secretary of State may make provision by regulations disqualifying a person subject to foreign restrictions from—
(a) being a director of a UK company,
(b) acting as receiver of a UK company’s property, or
(c) in any way, whether directly or indirectly, being concerned or taking part in the promotion, formation or management of a UK company.
(2) The regulations may provide that a person subject to foreign restrictions—
(a) is disqualified automatically by virtue of the regulations, or
(b) may be disqualified by order of the court on the application of the Secretary of State.
(3) The regulations may provide that the Secretary of State may accept an undertaking (a “disqualification undertaking”) from a person subject to foreign restrictions that he will not do anything which would be in breach of a disqualification under subsection (1).
(4) In this Part—
(a) a “person disqualified under this Part” is a person—
(i) disqualified as mentioned in subsection (2)(a) or (b), or
(ii) who has given and is subject to a disqualification undertaking;
(b) references to a breach of a disqualification include a breach of a disqualification undertaking.
(5) The regulations may provide for applications to the court by persons disqualified under this Part for permission to act in a way which would otherwise be in breach of the disqualification.
(6) The regulations must provide that a person ceases to be disqualified under this Part on his ceasing to be subject to foreign restrictions.
(7) Regulations under this section are subject to affirmative resolution procedure.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 426

Disqualification regulations: supplementary
‘(1) Regulations under section (Disqualification of persons subject to foreign restrictions) may make different provision for different cases and may in particular distinguish between cases by reference to—
(a) the conduct on the basis of which the person became subject to foreign restrictions;
(b) the nature of the foreign restrictions;
(c) the country or territory under whose law the foreign restrictions were imposed.
(2) Regulations under section (Disqualification of persons subject to foreign restrictions)(2)(b) or (5) (provision for applications to the court)—
(a) must specify the grounds on which an application may be made;
(b) may specify factors to which the court shall have regard in determining an application.
(3) The regulations may, in particular, require the court to have regard to the following factors—
(a) whether the conduct on the basis of which the person became subject to foreign restrictions would, if done in relation to a UK company, have led a court to make a disqualification order on an application under the Company Directors Disqualification Act 1986 (c. 46) or the Company Directors Disqualification (Northern Ireland) Order 2002 (S.I.2002/3150(N.I.4));
(b) in a case in which the conduct on the basis of which the person became subject to foreign restrictions would not be unlawful if done in relation to a UK company, the fact that the person acted unlawfully under foreign law;
(c) whether the person’s activities in relation to UK companies began after he became subject to foreign restrictions;
(d) whether the person’s activities (or proposed activities) in relation to UK companies are undertaken (or are proposed to be undertaken) outside the United Kingdom.
(4) Regulations under section (Disqualification of persons subject to foreign restrictions)(3) (provision as to undertakings given to the Secretary of State) may include provision allowing the Secretary of State, in determining whether to accept an undertaking, to take into account matters other than criminal convictions notwithstanding that the person may be criminally liable in respect of those matters.
(5) Regulations under section (Disqualification of persons subject to foreign restrictions)(5) (provision for application to court for permission to act) may include provision—
(a) entitling the Secretary of State to be represented at the hearing of the application, and
(b) as to the giving of evidence or the calling of witnesses by the Secretary of State at the hearing of the application.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 427

Offence of breach of disqualification
‘(1) Regulations under section (Disqualification of persons subject to foreign restrictions) may provide that a person disqualified under this Part who acts in breach of the disqualification commits an offence.
(2) The regulations may provide that a person guilty of such an offence is liable—
(a) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both);
(b) on summary conviction—
(i) in England and Wales, to imprisonment for a term not exceeding twelve months or to a fine not exceeding the statutory maximum (or both);
(ii) in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months, or to a fine not exceeding the statutory maximum (or both).
(3) In relation to an offence committed before the commencement of section 154(1) of the Criminal Justice Act 2003 (c.44), for “twelve months” in subsection (2)(b)(i) substitute “six months”.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 428

Personal liability for debts of company
‘(1) The Secretary of State may provide by regulations that a person who, at a time when he is subject to foreign restrictions—
(a) is a director of a UK company, or
(b) is involved in the management of a UK company,
is personally responsible for all debts and other liabilities of the company incurred during that time.
(2) A person who is personally responsible by virtue of this section for debts and other liabilities of a company is jointly and severally liable in respect of those debts and liabilities with—
(a) the company, and
(b) any other person who (whether by virtue of this section or otherwise) is so liable.
(3) For the purposes of this section a person is involved in the management of a company if he is concerned, whether directly or indirectly, or takes part, in the management of the company.
(4) The regulations may make different provision for different cases and may in particular distinguish between cases by reference to—
(a) the conduct on the basis of which the person became subject to foreign restrictions;
(b) the nature of the foreign restrictions;
(c) the country or territory under whose law the foreign restrictions were imposed.
(5) Regulations under this section are subject to affirmative resolution procedure.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 429

Statements from persons subject to foreign restrictions
‘(1) The Secretary of State may make provision by regulations requiring a person who—
(a) is subject to foreign restrictions, and
(b) is not disqualified under this Part,
to send a statement to the registrar if he does anything that, if done by a person disqualified under this Part, would be in breach of the disqualification.
(2) The statement must include such information as may be specified in the regulations relating to—
(a) the person’s activities in relation to UK companies, and
(b) the foreign restrictions to which the person is subject.
(3) The statement must be sent to the registrar within such period as may be specified in the regulations.
(4) The regulations may make different provision for different cases and may in particular distinguish between cases by reference to—
(a) the conduct on the basis of which the person became subject to foreign restrictions;
(b) the nature of the foreign restrictions;
(c) the country or territory under whose law the foreign restrictions were imposed.
(5) Regulations under this section are subject to affirmative resolution procedure.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 430

Statements from persons disqualified
‘(1) The Secretary of State may make provision by regulations requiring a statement or notice sent to the registrar of companies under any of the provisions listed below that relates (wholly or partly) to a person who—
(a) is a person disqualified under this Part, or
(b) is subject to a disqualification order or disqualification undertaking under the Company Directors Disqualification Act 1986 (c. 46) or the Company Directors Disqualification (Northern Ireland) Order 2002 (S.I.2002/3150(N.I.4)),
to be accompanied by an additional statement.
(2) The provisions referred to above are—
(a) section 12 (statement of a company’s proposed officers),
(b) section 152(2) (notice of person having become director),
(c) section 259 (notice of a person having become secretary or one of joint secretaries), and
(d) section (Duty to notify registrar of changes)(2) (notice of a person having been appointed an authorised signatory under Part (Authorised signatories).
(3) The additional statement is a statement that the person has obtained permission from a court, on an application under section (Disqualification of persons subject to foreign restrictions)(5) or (as the case may be) for the purposes of section 1(1)(a) of the Company Directors Disqualification Act 1986 (c.46) or Article 3(1) of the Company Directors Disqualification (Northern Ireland) Order 2002 (S.I.2002/3150(N.I.4)), to act in the capacity in question.
(4) Regulations under this section are subject to affirmative resolution procedure.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 431

Statements: whether to be made public
‘(1) Regulations under section (Statements from persons subject to foreign restrictions) or (Statements from persons disqualified) may provide that a statement sent to the registrar of companies under the regulations is to be treated as a record relating to a company for the purposes of section 733 (the companies register).
(2) The regulations may make provision as to the circumstances in which such a statement is to be, or may be—
(a) withheld from public inspection, or
(b) removed from the register.
(3) The regulations may, in particular, provide that a statement is not to be withheld from public inspection or removed from the register unless the person to whom it relates provides such information, and satisfies such other conditions, as may be specified.
(4) The regulations may provide that section 751 (note of removal of material from the register) does not apply, or applies with such modifications as may be specified, in the case of material removed from the register under the regulations.
(5) In this section “specified” means specified in the regulations.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 432

Offences
‘(1) Regulations under section (Statements from persons subject to foreign restrictions) or (Statements from persons disqualified) may provide that it is an offence for a person—
(a) to fail to comply with a requirement under the regulations to send a statement to the registrar;
(b) knowingly or recklessly to send a statement under the regulations to the registrar that is misleading, false or deceptive in a material particular.
(2) The regulations may provide that a person guilty of such an offence is liable—
(a) on conviction on indictment, to imprisonment for a term not exceeding two years or a fine (or both);
(b) on summary conviction—
(i) in England and Wales, to imprisonment for a term not exceeding twelve months or to a fine not exceeding the statutory maximum (or both);
(ii) in Scotland or Northern Ireland, to imprisonment for a term not exceeding six months, or to a fine not exceeding the statutory maximum (or both).
(3) In relation to an offence committed before the commencement of section 154(1) of the Criminal Justice Act 2003 (c. 44), for “twelve months” in subsection (2)(b)(i) substitute “six months”.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 433

Power to require information about exercise of voting rights
‘(1) The Treasury or the Secretary of State may make provision by regulations requiring institutions to which this section applies to provide information about the exercise of voting rights attached to shares to which this section applies.
(2) This power is exercisable in accordance with—
section (Institutions to which information provisions apply) (institutions to which information provisions apply),
section (Shares to which information provisions apply) (shares to which information provisions apply), and
section (Obligations with respect to provision of information) (obligations with respect to provision of information).
(3) In this section and the sections mentioned above—
(a) references to a person acting on behalf of an institution include—
(i) any person to whom authority has been delegated by the institution to take decisions as to any matter relevant to the subject matter of the regulations, and
(ii) such other persons as may be specified; and
(b) “specified” means specified in the regulations.
(4) The obligation imposed by regulations under this section is enforceable by civil proceedings brought by—
(a) any person to whom the information should have been provided, or
(b) a specified regulatory authority.
(5) Regulations under this section may make different provision for different descriptions of institution, different descriptions of shares and for other different circumstances.
(6) Regulations under this section are subject to affirmative resolution procedure.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 434

Institutions to which information provisions apply
‘(1) The institutions to which section (Power to require information about exercise of voting rights) applies are—
(a) unit trust schemes within the meaning of the Financial Services and Markets Act 2000 (c. 8) in respect of which an order is in force under section 243 of that Act;
(b) open-ended investment companies incorporated by virtue of regulations under section 262 of that Act;
(c) companies approved for the purposes of section 842 of the Income and Corporation Taxes Act 1988 (c.1) (investment trusts);
(d) pension schemes as defined in section 1(5) of the Pension Schemes Act 1993 (c.48) or the Pension Schemes (Northern Ireland) Act 1993 (c.49);
(e) undertakings authorised under the Financial Services and Markets Act 2000 (c.8) to carry on long-term insurance business (that is, the activity of effecting or carrying out contracts of long term insurance within the meaning of the Financial Services and Markets (Regulated Activities) Order 2001);
(f) collective investment schemes that are recognised by virtue of section 270 of that Act (schemes authorised in designated countries or territories).
(2) Regulations under that section may—
(a) provide that the section applies to other descriptions of institution;
(b) provide that the section does not apply to a specified description of institution.
(3) The regulations must specify by whom, in the case of any description of institution, the duty imposed by the regulations is to be fulfilled.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 435

Shares to which information provisions apply
‘(1) The shares to which section (Institutions to which information provisions apply) applies are shares—
(a) of a description traded on a specified market, and
(b) in which the institution has, or is taken to have, an interest.
Regulations under that section may provide that the section does not apply to shares of a specified description.
(2) For this purpose an institution has an interest in shares if the shares, or a depositary certificate in respect of them, are held by it, or on its behalf.
A “depositary certificate” means an instrument conferring rights (other than options)—
(a) in respect of shares held by another person, and
(b) the transfer of which may be effected without the consent of that person.
(3) Where an institution has an interest—
(a) in a specified description of collective investment scheme (within the meaning of the Financial Services and Markets Act 2000 (c.8)), or
(b) in any other specified description of scheme or collective investment vehicle,
it is taken to have an interest in any shares in which that scheme or vehicle has or is taken to have an interest.
(4) For this purpose a scheme or vehicle is taken to have an interest in shares if it would be regarded as having such an interest in accordance with subsection (2) if it was an institution to which section (Institutions to which information provisions apply) applied.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 436

Obligations with respect to provision of information
‘(1) Regulations under section (Power to require information about exercise of voting rights) may require the provision of specified information about—
(a) the exercise or non-exercise of voting rights by the institution or any person acting on its behalf,
(b) any instructions given by the institution or any person acting on its behalf as to the exercise or non-exercise of voting rights, and
(c) any delegation by the institution or any person acting on its behalf of any functions in relation to the exercise or non-exercise of voting rights or the giving of such instructions.
(2) The regulations may require information to be provided in respect of specified occasions or specified periods.
(3) Where instructions are given to act on the recommendations or advice of another person, the regulations may require the provision of information about what recommendations or advice were given.
(4) The regulations may require information to be provided—
(a) in such manner as may be specified, and
(b) to such persons as may be specified, or to the public, or both.
(5) The regulations may provide—
(a) that an institution may discharge its obligations under the regulations by referring to information disclosed by a person acting on its behalf, and
(b) that in such a case it is sufficient, where that other person acts on behalf of more than one institution, that the reference is to information given in aggregated form, that is—
(i) relating to the exercise or non-exercise by that person of voting rights on behalf of more than one institution, or
(ii) relating to the instructions given by that person in respect of the exercise or non-exercise of voting rights on behalf of more than one institution, or
(iii) relating to the delegation by that person of functions in relation to the exercise or non-exercise of voting rights, or the giving of instructions in respect of the exercise or non-exercise of voting rights, on behalf of more than one institution.
(6) References in this section to instructions are to instructions of any description, whether general or specific, whether binding or not and whether or not acted upon.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

New Clause 2

Names and addresses of members of companies: company application
‘(1) Subject to the provisions of this section, a company may make an application under this section to the Secretary of State where the condition in subsection (2) is satisfied.
(2) The condition referred to in subsection (1) above is that the company considers that the availability for inspection by members of the public of particulars of the names and usual residential or business addresses of the members of the company creates, or (if an order is not made under this section) is likely to create, a serious risk that a member of the company or a person who lives with or is an employee of a member of the company will be subjected to violence or intimidation (“a serious risk”).
(3) Where, on an application made by a company under this section, the Secretary of State is satisfied that the availability for inspection by members of the public of the particulars of that company’s members’ usual residential addresses creates or (if an order is not made under this section) is likely to create a serious risk that a member, or a person who lives with him, or an employee of his will be subjected to violence, intimidation or criminal activity, he shall make an order under this section (“a company member’s confidentiality order”) in relation to the company.
(4) Where the Secretary of State is not satisfied under subsection (3) he shall dismiss the application.
(5) At any time when a company member’s confidentiality order is in force in relation to a company, the name and address of any individual in the register of members of the company that is the subject of the confidentiality order, shall not be disclosed to any person who may request either company or Companies House disclosure of such names and addresses save in prescribed circumstances.
(6) The Secretary of State shall give the applicant notice of his decision under subsection (3) or (4); and a notice under this subsection shall be given within such period and shall contain such information as may be prescribed.
(7) The Secretary of State may at any time revoke a company members confidentiality order if he is satisfied that such conditions as may be prescribed are satisfied.’.—[Mr. Djanogly.]

Brought up, and added to the Bill

Motion made, and Question put, That the clause be added to the Bill:—

The Committee divided: Ayes 8, Noes 11.

Question accordingly negatived.

New Schedule 1

Meaning of “subsidiary” etc: supplementary provisions

None

1 The provisions of this Part of this Schedule explain expressions used in section (Meaning of “subsidiary” etc) (meaning of “subsidiary” etc) and otherwise supplement that section.

None

2 In section (Meaning of “subsidiary” etc)(1)(a) and (c) the references to the voting rights in a company are to the rights conferred on shareholders in respect of their shares or, in the case of a company not having a share capital, on members, to vote at general meetings of the company on all, or substantially all, matters.

None

3 (1) In section (Meaning of “subsidiary” etc)(1)(b) the reference to the right to appoint or remove a majority of the board of directors is to the right to appoint or remove directors holding a majority of the voting rights at meetings of the board on all, or substantially all, matters.
(2) A company shall be treated as having the right to appoint to a directorship if—
(a) a person’s appointment to it follows necessarily from his appointment as director of the company, or
(b) the directorship is held by the company itself.
(3) A right to appoint or remove which is exercisable only with the consent or concurrence of another person shall be left out of account unless no other person has a right to appoint or, as the case may be, remove in relation to that directorship.

None

4 (1) Rights which are exercisable only in certain circumstances shall be taken into account only—
(a) when the circumstances have arisen, and for so long as they continue to obtain, or
(b) when the circumstances are within the control of the person having the rights.
(2) Rights which are normally exercisable but are temporarily incapable of exercise shall continue to be taken into account.

None

5 Rights held by a person in a fiduciary capacity shall be treated as not held by him.
6 (1) Rights held by a person as nominee for another shall be treated as held by the other.
(2) Rights shall be regarded as held as nominee for another if they are exercisable only on his instructions or with his consent or concurrence.

None

7 Rights attached to shares held by way of security shall be treated as held by the person providing the security—
(a) where apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights are exercisable only in accordance with his instructions, and
(b) where the shares are held in connection with the granting of loans as part of normal business activities and apart from the right to exercise them for the purpose of preserving the value of the security, or of realising it, the rights are exercisable only in his interests.

None

8 (1) Rights shall be treated as held by a holding company if they are held by any of its subsidiary companies.
(2) Nothing in paragraph 6 or 7 shall be construed as requiring rights held by a holding company to be treated as held by any of its subsidiaries.
(3) For the purposes of paragraph 7 rights shall be treated as being exercisable in accordance with the instructions or in the interests of a company if they are exercisable in accordance with the instructions of or, as the case may be, in the interests of—
(a) any subsidiary or holding company of that company, or
(b) any subsidiary of a holding company of that company.

None

9 The voting rights in a company shall be reduced by any rights held by the company itself.

None

10 References in any provision of paragraphs 5 to 9 to rights held by a person include rights falling to be treated as held by him by virtue of any other provision of those paragraphs but not rights which by virtue of any such provision are to be treated as not held by him.’.—[Margaret Hodge.]

Brought up, and added to the Bill.

Clauses 813 and 814 ordered to stand part of the Bill.

Schedule 9

Index of defined expressions

Amendments made: No. 114, in schedule9,page509line17,at end insert—
‘authorised signatory
section (Authorised signatories)’.
No. 453, in schedule9,page512,leave out line 22.
No. 454, in schedule9,page517,line22,at end insert—
‘small companies regime, for accounts and reports
section 363’.
No. 115, in schedule9,page514,line32,leave out
‘section 362 of the 1985 Act’
and insert
‘section (Overseas branch registers)(1)’.
No. 310, in schedule9,page515,line36,at end insert—
‘qualifying pension scheme indemnity provision (in Chapter 7 of Part 10)
Section (Qualifying pension scheme indemnity provision)’.
—[Margaret Hodge.]

Schedule 9, as amended, agreed to.

Clauses 815 to 820 ordered to stand part of the Bill.

Clause 920 ordered to stand part of the Bill.

Schedule 16 agreed to.

Amendment made: No. 524, in title,line3,after ‘about’ insert ‘directors’ disqualification,’.—[Margaret Hodge.]

Margaret Hodge: On a point of order, Mr. Bercow. As we are coming to the end of the proceedings, I could not let the sitting pass without extending a big thank-you to you and Mr. Illsley for the way that you have chaired the Committee. You have endless patience, consistent good humour and complete and constant fairness, and neither of you ever fell asleep. That is a brilliant performance.
I thank all Committee members, particularly those from the Government Benches. It is very difficult to be a Back-Bench Committee member on a Government Bill, particularly such a long Bill that has taken so many sittings. I thank my hon. Friends for their patience, time, endurance at some points and participation in Committee.
he Bill has made history. I am told by the Clerks that, so far as records can tell, it is the longest Bill ever taken in Parliament. It has made history for all sorts of other reasons, not least of which was a two-and-a-half-hour diversionary lecture on takeover panels and a shorter but also diversionary lecture on Eccles cakes. The Committee was extremely lucky not to be bored with the workings of Barking rugby club, although I am confident it will gain from the proceedings of the Bill.
I have learned a lot. We have cogitated at length on various issues. I shall pick out some that really stimulated me: the differences between success and effectiveness, “alters” and “amends”, assignment and assignation, costs and expenses, shares and stocks—that was an easy one—and de facto and shadow directors. They were all new words for me, and I am sure that I am much wiser for it.
I should also like to express huge thanks to our team of officials, who have supported us so brilliantlyand have worked exceedingly hard throughout consideration of the Bill, even when it was in the House of Lords. They have performed brilliantly. I thank them very much indeed.
I thank the Clerks and officials of the House for their customary excellence in ensuring that everything ran smoothly until Members of Parliament got involved, and particularly for the endless glasses of water that we have been given in this hot place. I thank the police for their courtesy.
Finally, our biggest thanks go to Lizzie Colley, who brought joy to all of us in our darkest moments during the course of the Bill, and who I am sure has benefited fantastically. Maybe she has even almost learned to walk during the last while.

Jonathan Djanogly: Further to that point of order, Mr. Bercow. I too would like to say a few words on the conduct of the Committee. Despite its length—it is a long Bill—I have enjoyed it, mainly due to the general good nature and humour of the proceedings and of Committee members and the generally co-operative approach of the Ministers. The Minister’s offer of a three-day Report was well received in the Conservative party.
We have had exemplary chairmanship from Mr. Bercow, in his first Committee, and from Mr. Illsley. Both of them were calm and decisive when the Committee was occasionally less so. We have also been well helped on our way by the doorkeepers, police, Hansard reporters and Clerks, whom I thank.
I also thank the Bill team, which has always been efficient and helpful. I am sure that that will continue during the summer months as we review the new clauses. Some 30 to 40 City lawyers and accountants have provided me and Lord Hodgson with help on the Bill, and many other interested parties have given us briefings and help of one sort or another. There are too many to name, but I thank them all for their help.
Finally, I thank my hon. Friends for their excellent contributions to the Committee and their support for me. I wish everyone a happy summer break; we need it.

David Howarth: Further to that point of order, Mr. Bercow, may I add my thanks to all concerned in this exceptionally long Bill, including you and your co-Chair? It must have been an extraordinary introduction to the chairing of a Bill Committees. It used to be the case that, at the end of very long trials, judges would tell the jurors that they were excused future jury service. I do not know, Mr. Bercow, whether you might put yourself in the same position—and, of course, some members of this Committee might think themselves entitled to the same treatment.
I should like to thank my own colleagues, and everyone on both sides for their forbearance in what seemed something like a trial as we proceeded through the Bill. We have not quite discussed all the big political issues, but we just about managed nearly all of them. I thank the right hon. Member for Leicester, East (Keith Vaz) who, I am sad to say, is not with us, for the one thing that we did not manage to discuss: his excellent new clause, to which we might have to return at a later point. I add my thanks to all the staff and officials who have worked so hard on the Bill. It might not always have been a pleasure to be on this Committee, but it was certainly a privilege and an experience.

John Bercow: Perhaps I can conclude by echoing the thanks that have already been expressed from the those on the three Front Benches to all who have facilitated the smooth passage of the Bill. For my part, I am extremely grateful to a number of people. The first is my co-Chair, Mr. Illsley, a senior member of the chairman’s panel, with whom it has been a pleasure and privilege for me to work. He has been thoroughly collegiate, co-operative and helpful throughout and, as this is my first outing, I have been extremely grateful to him. I hope that it will not be judged by the powers that be that it should also be my last; I await the verdict in due course.
I echo the thanks that have been expressed to the police, to the door keepers and to all the members of the Committee for their helpful contributions and their accommodating attitude to the Chair. I want to thank senior executive officer Mark Oxborough, who was in the room until a few moments ago and who has done a great deal of work on the Bill behind the scenes.
From my personal point of view—I hope that others will understand the significance of this in my mind—I am grateful more than I will ever be able to say to three other people. The first is Dr. Mark Egan, who started the work of clerking on the Bill, but who was taken away from it because of family circumstances beyond his control. He is a very respected member of the staff of the House, and I am appreciative of his efforts, his guidance and his patience in dealing with me. The two others are those who, in practice, have clerked the Bill for much of the time, Dr. John Benger and Alan Sandall, who is now immediately on my left. They are very experienced Clerks and were no doubt chosen partly because of the significance, complexity and length of the Bill but possibly even, in part, on account of the knowledge of the powers that be that a completely inexperienced new Chair was going to be tested and needed to be looked after. They have certainly looked after me and I am very grateful.
Finally, I want to thank the Hansard Committee Sub-Editors who have done their jobs faithfully, conscientiously and effectively from start to finish.

Bill, as amended, to be reported.

Committee rose at fourteen minutes past Two o’clock.